Notes to the Unaudited Condensed Consolidated
Financial Statements
NOTE 1 – ORGANIZATION
Next Graphite, Inc. (the “Company”)
was incorporated in Nevada on September 26, 2012 under the name Zewar Jewellery, Inc. and is a development-stage entity. The Company’s
current business plan is to engage in the mining business developing graphite properties located in Namibia. The Company is based
in Carson City, Nevada.
On November 14, 2013, the Company consummated
transactions pursuant to a Share Exchange Agreement (the “Share Exchange Agreement”) dated November 14, 2013 by and
among the Company and the stockholders of African Graphite, Inc., a private Nevada corporation (“AGI” and the “AGI
Stockholders”) whereby AGI Stockholders transferred 100% of the outstanding shares of common stock of AGI held by them, in
exchange for an aggregate of 8,980,047 newly issued shares of the Company’s common stock, par value $.0001 per share (the
“Common Stock”).
On November 14, 2013, AGI entered into
a Stock Purchase Option Agreement (the “Option Agreement”) with NMC Corp., a corporation organized under the laws of
the Province of Ontario, Canada (“NMC”), whereby NMC granted to AGI an option to purchase 90 ordinary shares, par value
one Namibian dollar per share, of Gazania Investments Two Hundred and Forty Two (Proprietary) Limited, a corporation organized
under the laws of the Republic of Namibia (“Gazania”), representing 90% of the issued and outstanding shares of Gazania,
for $240,000. NMC had entered into an option agreement dated March 29, 2013, as amended on November 4, 2013 (the “Centre
Agreement”), with Centre for Geoscience Research CC (formerly known as “Industrial Minerals and Rock Research Centre
CC”), a company organized under the laws of the Republic of Namibia (“Centre”), whereby Centre agreed to transfer
to Gazania 100% undivided interest in the exclusive prospecting license No. 3895 known as AUKAM originally issued to Centre by
the government of the Republic of Namibia on April 4, 2011 and renewed on April 4, 2013 (the “License”). The License
grants the right to conduct prospecting operations, bulk sampling and pilot production in the license area called AUKAM located
in southern Namibia in the Karas Region within the Betaine district. The license area covers about 49,127 hectares. The only mine
in Namibia which has produced graphite is situated in the license area. The transfer of the License to Gazania was approved by
the Ministry of Mines and Energy of the Republic of Namibia on February 25, 2014.
Under the Option Agreement, AGI was required
to pay to NMC $90,000 as an advance payment to be credited towards the purchase price of the Gazania shares. The Company made the
advance payment on November 14, 2013. The balance of the purchase price in the amount of $150,000 was paid by AGI upon exercise
of the option that was completed on March 14, 2014. As a result, Gazania became a direct 90% owned subsidiary of the Company.
The Company acquired the remaining 10%
ownership of Gazania for $15,000 in the third quarter of 2015. As a result, Gazania became a direct 100% owned subsidiary of the
Company.
NOTE 2 – GOING CONCERN
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America,
which contemplates continuation of the Company as a going concern. The Company has incurred approximately $ 5,002,965 in accumulated
deficit since its inception, and has generated no operating revenue, which could raise substantial doubt about the Company’s
ability to continue as a going concern.
In view of these matters, realization of
the assets of the Company is dependent upon the Company’s ability to meet its financial requirements through equity financing
and the success of future operations. These unaudited condensed consolidated financial statements do not include adjustments relating
to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue in existence.
NOTE 3 – BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q.
In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments,
including normal recurring adjustments, considered necessary to present fairly the financial position, the results of operations
and comprehensive income (loss) and cash flows of the Company for the periods presented. These unaudited condensed consolidated
financial statements and notes hereto should be read in conjunction with the financial statements and notes thereto for the year
ended December 31, 2016 included in the Company’s Form 10-K filed on March 31, 2017. The operating results or
cash flows for the interim periods presented herein are not necessarily indicative of the results to be expected for any other
interim period or the full year.
NOTE 4 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Use of Estimates
The preparation
of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results
could differ materially from those estimates.
Revenue Recognition, Deferred Revenue
and Customer Deposits
The Company recognizes revenue in accordance
with ASC 605, “Revenue Recognition,” when persuasive evidence of an arrangement exists, the price is fixed or determinable,
collection is reasonably assured and delivery of products has occurred or services have been rendered. The Company did not have
product sales for the three months ended March 31, 2017 and 2016.
Gain on the sales of subsidiary Gazania
Investments Two Hundred Forty Two (Property) Ltd
The Company received a customer deposit for potential usage of Company’s license in the amount of $177,493
and $132,971 as of March 31, 2017 and December 31, 2016, respectively. The Company recognize the amount of $177,493 as gain on
sale of subsidiary by transferring 52% of interest to the joint venture party.
Income Taxes
Provisions for income taxes are based on
taxes payable or refundable and deferred taxes. Deferred taxes are provided on differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements and tax operating loss carry forwards. Deferred tax assets and
liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred
tax assets and liabilities are adjusted through the provision for income taxes. Assets and liabilities are established for uncertain
tax positions taken or positions expected to be taken in income tax returns when such positions are judged to not meet the “more-likely-than-not”
threshold based on the technical merits of the positions. Estimated interest and penalties related to uncertain tax positions are
included as a component of general and administrative expense.
Basic and Diluted Loss per Common
Share
Basic loss per common share amounts are
computed by dividing net loss by the weighted-average number of shares of common stock outstanding during each period. Diluted
loss per share amounts are computed assuming the issuance of common stock for potentially dilutive common stock equivalents.
Fair Value
of Financial Instruments
The carrying amounts reported in the balance
sheets for accounts payable, and related party payables approximate fair value because of the immediate or short-term maturity
of these financial instruments. The carrying amounts reported for convertible notes payable approximate fair value based on the
value of the common stock into which the notes are convertible. The carrying amounts reported for notes payable approximate fair
value because the underlying instruments are at interest rates that approximate current market rates.
ASC 820 defines fair value as the price
that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded
at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions
that market participants would use when pricing the asset or liability. ASC 820 establishes a fair value hierarchy that requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial
instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to
the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value:
|
●
|
Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company holds. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
●
|
Level 2 – Valuation based on quoted prices in markets that are not active for which all significant inputs are observable, either directly or indirectly.
|
|
●
|
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
|
Financial instruments include cash, accounts
payable and accrued expenses and other current liabilities. The carrying amounts of cash, accounts payable and accrued expenses
and other current liabilities approximate their fair value due to the short term maturities of these instruments.
The Company has Level 3 financial instrument,
an embedded derivative liability (beneficial conversion feature) that is recorded at fair value on periodic basis. The embedded
derivative is evaluated under the hierarchy of ASC 480-10, ASC Paragraph 815-25-1 and ASC Subparagraph 815-10-15-74 addressing
embedded derivatives. The fair value of such Level 3 financial instrument is estimated using the Black-Scholes option pricing model.
The foregoing Level 3 financial instrument has certain provisions which qualifies to be classified as a liability under ASC 815.
As of March 31, 2017, the following table
represents the Company’s fair value hierarchy for items that are required to be measured at fair value on a recurring basis:
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
46,476
|
|
As of December 31, 2016, the following
table represents the Company’s fair value hierarchy for items that are required to be measured at fair value on a recurring
basis:
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
38,756
|
|
Recent Accounting Pronouncements
In March 2016,
the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09,
Compensation – Stock
Compensation
(Topic 718)
: Improvements to Employee Share-Based Payment Accounting
. This ASU is intended to simplify
several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of
awards as either equity or liabilities, and classification on the statement of cash flows. The provisions of this ASU are effective
for years beginning after December 15, 2016. Early application is permitted. The Company is currently evaluating the impact of
this ASU.
In August 2014, the FASB issued ASU No.
2014-15,
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
. This ASU establishes
specific guidance to an organization’s management on their responsibility to evaluate whether there is substantial doubt
about the organization’s ability to continue as a going concern. The provisions of ASU 2014-15 are effective for interim
and annual periods beginning after December 15, 2016. This ASU is not expected to have an impact on the Company’s financial
position, results of operations or cash flows.
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
(Topic 606). The objective of ASU 2014-09 is to clarify the principles for recognizing
revenue by removing inconsistencies and weaknesses in revenue requirements; providing a more robust framework for addressing revenue
issues; improving comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets;
and providing more useful information to users of financial statements through improved revenue disclosure requirements. On August
12, 2015, the FASB issued ASU No. 2015-14, deferring the effective date by one year for ASU No. 2014-09. The provisions of ASU
No. 2014-09 will be effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted for
annual periods beginning after December 15, 2016. The Company is currently evaluating the impact of this standard on its financial
position, results of operations and cash flows.
NOTE 5 – ACCOUNTS PAYABLE
As of March 31, 2017, and December 31,
2016, the Company’s accounts payable was primarily composed of professional fees.
NOTE 6 – NOTES PAYABLE
The Company had the following notes payable
as of March 31, 2017 and December 31, 2016:
Issuance Date
|
|
Maturity Date
|
|
Interest
Rate
|
|
|
March 31,
2017
(unaudited)
|
|
|
December 31,2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 10, 2015
|
|
February 9, 2016
|
|
|
7.0
|
%
|
|
$
|
24,000
|
|
|
$
|
24,000
|
|
March 31, 2015
|
|
September 30, 2015
|
|
|
7.0
|
%
|
|
|
10,000
|
|
|
|
10,000
|
|
December 3, 2015
|
|
February 29, 2016
|
|
|
10.0
|
%
|
|
|
29,000
|
|
|
|
29,000
|
|
December 23, 2015
|
|
September 29, 2016
|
|
|
10.0
|
%
|
|
|
20,500
|
|
|
|
20,500
|
|
March 2, 2016
|
|
September 29, 2016
|
|
|
10.0
|
%
|
|
|
13,500
|
|
|
|
13,500
|
|
March 2, 2016
|
|
September 29, 2016
|
|
|
10.0
|
%
|
|
|
15,000
|
|
|
|
15,000
|
|
August 3, 2016
|
|
September 30, 2016
|
|
|
8.0
|
%
|
|
|
10,000
|
|
|
|
10,000
|
|
August 3, 2016
|
|
September 30, 2016
|
|
|
8.0
|
%
|
|
|
7,500
|
|
|
|
7,500
|
|
September 9, 2016
|
|
March 9, 2017
|
|
|
6.0
|
%
|
|
|
7,500
|
|
|
|
7,500
|
|
October 13, 2016
|
|
April 13, 2017
|
|
|
6.0
|
%
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
147,000
|
|
|
$
|
147,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original issuance discount
|
|
|
|
|
|
|
|
|
(1,517
|
)
|
|
|
(1,517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
145,483
|
|
|
$
|
145,483
|
|
The notes payable with the maturity date
that has matured at the time the financial statements are issued continued to accrue interest and no default penalties were incurred.
Interest expense for notes payable amounted to $3,123 and $11,142 for the quarters (3 months) ended March 31, 2017 and 2016. The
Company recorded original issue discount of $1,517 for March 31, 2017 and December 31, 2016.
NOTE 7 – NOTES PAYABLE –
RELATED PARTY
The Company had the following related party
notes payable as of March 31, 2017 and December 31, 2016:
Description
|
|
Issuance Date
|
|
Maturity Date
|
|
Interest Rate
|
|
|
March 31, 2017
(unaudited)
|
|
|
December 31,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Doron
|
|
July 8, 2015
|
|
September 8, 2015
|
|
|
8.0
|
%
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
Charles C. Bream III
|
|
July 8, 2015
|
|
September 8, 2015
|
|
|
8.0
|
%
|
|
|
2,500
|
|
|
|
2,500
|
|
Charles C. Bream III
|
|
August 24, 2015
|
|
November 23, 2015
|
|
|
8.0
|
%
|
|
|
1,000
|
|
|
|
1,000
|
|
Charles C. Bream III
|
|
August 1, 2016
|
|
September 30, 2016
|
|
|
8.0
|
%
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
16,000
|
|
|
$
|
16,000
|
|
Interest expense for notes payable-related
party amounted to $316 and $298 for the quarter (3 months) ended March 31, 2017 and 2016.
NOTE 8 – CONVERTIBLE NOTES PAYABLE
The Company issued convertible notes payable.
The outstanding balance and any accrued interest is due on maturity date or when the cash is available to repay the notes payable.
Under the agreement, the notes can be convertible at the holder’s discretion into common shares of the Company’s stock
at a 25% discount to the price at the date of exercise.
The Company’s convertible notes payable
is as follows:
Convertible Note
|
|
Issuance Date
|
|
Maturity Date
|
|
Interest Rate
|
|
|
Original Borrowing
|
|
|
Balance at
March 31, 2017
(unaudited)
|
|
|
Balance at December 31,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 1
|
|
October 2, 2014
|
|
December 31, 2015
|
|
|
7.0
|
%
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
Note 2
|
|
December 23, 2015
|
|
September 23, 2016
|
|
|
16.0
|
%
|
|
$
|
21,000
|
|
|
$
|
21,000
|
|
|
$
|
21,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,000
|
|
|
|
121,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
121,000
|
|
|
$
|
121,000
|
|
The convertible notes with the maturity
date that has matured at the time the financial statements are issued continued to accrue interest and no default penalties were
incurred. The Company incurred $2,554 and $1,665 of interest expense for the quarter (3 months) ended March 31, 2017 and 2016.
No convertible notes were converted as of March 31, 2017 and up to the date the financial statements are issued.
The Company adopted the provisions of FASB
ASC Topic 815, “Derivatives and Hedging” (“ASC 815”) (previously EITF 07-5, “Determining Whether
an Instrument (or an Embedded Feature) is Indexed to an Entity’s Own Stock”), as the convertible note agreement contained
certain provision that the convertible note failed to pass the “fixed for fixed” criteria of ASC815, the conversion
feature of the convertible debt should have to be bifurcated and recorded separately until the conversion date.
The following table represents fair value
of embedded derivative movement from the date of issuance to December 31, 2016:
Embedded Derivative Liabilities
|
|
Fair Value at Date of Issuance
|
|
|
Changes in Fair Value
|
|
|
Fair Value at December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Note 1 – Issued in 2014
|
|
$
|
70,334
|
|
|
$
|
(34,778
|
)
|
|
$
|
35,556
|
|
Note 2 – Issued in 2015
|
|
$
|
10,500
|
|
|
$
|
(17,800
|
)
|
|
$
|
3,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
(52,578
|
)
|
|
$
|
38,756
|
|
As a result of initial recording of derivative
liability of $30,500 for convertible notes issued in 2015 with proceeds of $49,000 the Company recorded debt discount of $30,500
at the date of issuance of convertible note payable for issuances occurred in 2015. The Company accretes debt discount of $30,500
for convertible notes issued in 2015 and $70,334 for convertible note issued in 2014 over the life of the convertible note.
Based on ASC 815, the Company determined
that the convertible debt contained embedded derivatives and full-ratchet provision which the Company valued the embedded derivative
using the Black-Scholes method. The following table represents fair value of embedded derivative movement from the date of issuance
to March 31, 2017:
Embedded Derivative Liabilities
|
|
Fair Value at Date of Issuance
|
|
|
Changes in Fair Value
|
|
|
Fair Value at March 31, 2017
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Note 1 – Issued in 2014
|
|
$
|
70,334
|
|
|
$
|
(37,001
|
)
|
|
$
|
33,333
|
|
Note 2 – Issued in 2015
|
|
$
|
21,000
|
|
|
$
|
(7,857
|
)
|
|
$
|
13,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
(44,858
|
)
|
|
$
|
46,476
|
|
The Company recorded accretion of $5,483
and $7,350 for the three months ended on March 31, 2017 and 2016 which is recorded as interest expense.
NOTE 9 – PROVISION FOR INCOME
TAXES
The Company recognizes the tax effects
of transactions in the year in which such transactions enter into the determination of net income regardless of when reported for
tax purposes. Deferred taxes are provided in the financial statements under FASB 740-10-65-1 to give effect to the temporary differences
which may arise from differences in the bases of fixed assets, depreciation methods and allowances based on the income taxes expected
to be payable in future years. Minimal development stage deferred tax assets arising as a result of net operating loss carry-forwards
have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods.
The Company recognizes interest accrued
relative to unrecognized tax benefits in interest expense and penalties in operating expense. During the period from August 28,
2013 (inception) to March 31, 2017, the Company recognized no income tax related interest and penalties. The Company had no accruals
for income tax related interest and penalties at March 31, 2017.
NOTE 10 -
STOCKHOLDERS’
DEFICIT
As of March 31, 2017, the Company had
(i) 100,000,000 Common shares authorized with a par value of $.0001 per share, of which 51,411,443 shares were issued and outstanding,
and (ii) 25,000,000 shares of preferred stock, par value $.0001 per share, authorized, none of which was issued and outstanding.
On November 14, 2013, the Company consummated transactions pursuant to the Share Exchange
Agreement with AGI dated November 14, 2013 by and among the Company and the stockholders of AGI whereby the AGI Stockholders transferred
100% of the outstanding shares of common stock of AGI held by them, in exchange for an aggregate of 8,980,047 newly issued shares
of Common Stock
, of which, 400,016 shares were issued to the President and director as part of their consulting agreements.
The shares were valued at par for a value of $898.
NOTE 11 – RESTRICTED COMMON SHARES AND WARRANTS
In May 20, 2014, the Company approved future
issuances of performance based restricted common shares to the following employees and outside consultants. The Company accounts
the issuances of restricted common shares, as defined by ASC 718,
Compensation—Stock Compensation
, in accordance
with ASC 718. The restricted common shares will be issued upon completion of certain tasks or deliverables and contain certain
exercise price with no expiration period.
On May 28, 2015, the Company has elected
to grant warrants to certain entities and individuals in lieu of restricted common stock that has been issued.
a) A
summary of the status of the Company’s restricted common shares is presented below:
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual Life
(in Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at December 31, 2015
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Outstanding at December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
N/A
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Outstanding at March 31, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
N/A
|
|
|
$
|
-
|
|
Vested at March 31, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
N/A
|
|
|
$
|
-
|
|
b) The
stock warrants issued in lieu of restricted common stock granted but not yet issued is presented below:
Date Issued
|
|
Exercise Price
|
|
|
Number of Shares
|
|
|
Weighted Average Remaining Contractual Life
|
|
Expiration date
|
|
|
|
|
|
|
|
|
|
|
|
May 28, 2015 (Issued in lieu of restricted common stock)
|
|
$
|
0.011
|
|
|
|
2,720,000
|
|
|
3.16 years
|
|
May 27, 2020
|
May 28, 2015 (Issued in lieu of restricted common stock)
|
|
$
|
0.011
|
|
|
|
25,000
|
|
|
3.16 years
|
|
May 27, 2020
|
June 16, 2015 (Issued in lieu of restricted common stock)
|
|
$
|
0.011
|
|
|
|
2,000,000
|
|
|
3.21 years
|
|
June 15, 2020
|
July 8, 2015 (Issued in lieu of restricted common stock)
|
|
$
|
0.011
|
|
|
|
25,000
|
|
|
3.27 years
|
|
July 7, 2020
|
July 8, 2015 (Issued in lieu of restricted common stock)
|
|
$
|
0.011
|
|
|
|
25,000
|
|
|
3.27 years
|
|
July 7, 2020
|
August 24, 2015 (Issued in lieu of restricted common stock)
|
|
$
|
0.011
|
|
|
|
10,000
|
|
|
3.40 years
|
|
August 23, 2020
|
February 1, 2016
|
|
$
|
0.003
|
|
|
|
3,000,000
|
|
|
3.84 years
|
|
January 31,2021
|
February 1, 2016
|
|
$
|
0.003
|
|
|
|
1,750,000
|
|
|
3.84 years
|
|
January 31,2021
|
February 29, 2016
|
|
$
|
0.004
|
|
|
|
50,000
|
|
|
3.92 years
|
|
February 28, 2021
|
July 15, 2016
|
|
$
|
0.03
|
|
|
|
1,500,000
|
|
|
4.29 years
|
|
July 14, 2021
|
January 6, 2017
|
|
$
|
0.03
|
|
|
|
1,750,000
|
|
|
4,77 years
|
|
January 5, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total warrants at March 31, 2017
|
|
|
|
|
|
|
12,855,000
|
|
|
|
|
|
The initial fair value of the new warrants
issued for services in 1
st
quarter, 2016 was estimated at an aggregate value of $5,449. The initial fair value of the
new warrants issued for services in 3
rd
quarter, 2016 was estimated at an aggregate value of $40,002. The initial fair
value of the new warrants issued for services in 1st quarter, 2017 was estimated at an aggregate value of $48,558. All warrants
are vested and exercisable immediately.
The total 1,750,000 and 4.750,000 share
of warrants for three months ended on March 31,2017 and 2016 were issued to a related party, 360 Partners.
NOTE 12 – COMMITMENTS AND CONTINGENCIES
The Company is
subject to various legal proceedings from time to time as part of its business. As of March 31,2017, the Company was not currently
party to any legal proceedings or threatened legal proceedings, the adverse outcome of which, individually or in the aggregate,
it believes would have a material adverse effect on its business, financial condition and results of operations.
NOTE 13 –RESTATEMENT of PREVIOUSLY
ISSUED FINANCIAL STATEMENTS
Subsequent to filing its Quarterly Report
on Form 10-Q for the period ended March 31, 2017 (the “Form 10-Q”) with the Securities and Exchange Commission (the
“SEC”) on May 22, 2017, Next Graphite, Inc. (the “Company”) determined that a account classification error
occurred in its gain recognition of the sale of subsidiary for the period ended March 31, 2017.
In
accounting for the Company’s gain on the sale of 52% interest of subsidiary Gazania Investments Two Hundred and Forty
Two (Proprietary) Limited for the period ended March 31, 2017, the Company reclass the deposit from investment into
additional paid in capital which the joint venture partner fulfilled and achieved the certain milestone for the period ended
March 31, 2017. Upon correcting for the previously used additional paid in capital, the Company should recognize the gain on
the sales of subsidiary as income and has been $177,493 higher than previously reported.
The Company has restated its previously
issued financial statements as of and for the three months ended March 31, 2017, to correct the classification error related to
gain on the sale of subsidiary.
The impact of the restatements is reflected
below for the periods indicated:
Condensed Consolidated Balance Sheets
|
|
As of March 31, 2017
|
|
|
|
As previously
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
Restated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
9,485
|
|
|
$
|
-
|
|
|
$
|
9,485
|
|
Total current assets:
|
|
|
9,485
|
|
|
|
-
|
|
|
|
9,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
9,485
|
|
|
$
|
-
|
|
|
$
|
9,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
419,859
|
|
|
$
|
-
|
|
|
$
|
419,859
|
|
Accrued interest payable
|
|
|
34,763
|
|
|
|
-
|
|
|
|
34,763
|
|
Note payable, net of debt discount $1,517 and $1,517, respectively
|
|
|
145,483
|
|
|
|
-
|
|
|
|
145,483
|
|
Note payable – related parties
|
|
|
16,000
|
|
|
|
-
|
|
|
|
16,000
|
|
Convertible note payable
|
|
|
121,000
|
|
|
|
-
|
|
|
|
121,000
|
|
Fair value of derivative liability - beneficial conversion feature
|
|
|
46,476
|
|
|
|
-
|
|
|
|
46,476
|
|
Deposit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total current liabilities
|
|
|
783,581
|
|
|
|
-
|
|
|
|
783,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
783,581
|
|
|
|
-
|
|
|
|
783,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock authorized 25,000,000 shares, $.0001 par value, no shares issued and outstanding at March 31, 2017 and December 31, 2016.
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common stock authorized 100,000,000 shares, $.0001 par value, 51,411,443 shares issued and outstanding at March 31, 2017 and December 31, 2016.
|
|
|
5,141
|
|
|
|
-
|
|
|
|
5,141
|
|
Additional paid-in capital
|
|
|
4,401,221
|
|
|
|
(177,493
|
)
|
|
|
4,223,728
|
|
Accumulated deficit
|
|
|
(5,180,458
|
)
|
|
|
177,493
|
|
|
|
(5,002,965
|
)
|
Total stockholders’ deficit
|
|
|
(774,096
|
)
|
|
|
-
|
|
|
|
(774,096
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit
|
|
$
|
9,485
|
|
|
$
|
-
|
|
|
$
|
9,485
|
|
Condensed Consolidated Statements of
Operations
|
|
For the Three Months Ended March 31, 2017
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Report
|
|
|
Adjustment
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
96,222
|
|
|
|
-
|
|
|
|
96,222
|
|
Selling, general, and administrative
|
|
|
10,191
|
|
|
|
-
|
|
|
|
10,191
|
|
Total Operating Expenses
|
|
|
106,413
|
|
|
|
-
|
|
|
|
106,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(106,413
|
)
|
|
|
-
|
|
|
|
(106,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income
|
|
|
1,775
|
|
|
|
-
|
|
|
|
1,775
|
|
Gain on the sale of subsidiary
|
|
|
-
|
|
|
|
177,493
|
|
|
|
177,493
|
|
Interest expense
|
|
|
(6,195
|
)
|
|
|
-
|
|
|
|
(6,195
|
)
|
Changes in fair value of derivative
|
|
|
(7,720
|
)
|
|
|
-
|
|
|
|
(7,720
|
)
|
Total Other Income (Expenses), net
|
|
|
(12,140
|
)
|
|
|
177,493
|
|
|
|
165,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME/LOSS
|
|
$
|
(118,553
|
)
|
|
$
|
177,493
|
|
|
$
|
58,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME/LOSS PER BASIC SHARES
|
|
$
|
0.00
|
|
|
$
|
-
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING – BASIC
|
|
|
51,411,443
|
|
|
|
|
|
|
|
51,411,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME/(LOSS) PER DILUTED SHARES
|
|
$
|
0.00
|
|
|
$
|
-
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING –DILUTED
|
|
$
|
51,411,443
|
|
|
$
|
15,648,651
|
|
|
$
|
67,060,094
|
|
Condensed Consolidated Statements of
Cash Flows
|
|
For the Three Months Ended March 31, 2017
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Report
|
|
|
Adjustment
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
(118,553
|
)
|
|
$
|
177,493
|
|
|
$
|
58,940
|
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in deposit balance
|
|
|
44,522
|
|
|
|
(222,015
|
)
|
|
|
(177,493
|
)
|
Stock based compensation
|
|
|
48,558
|
|
|
|
-
|
|
|
|
48,558
|
|
Interest expense – note payable
|
|
|
3,439
|
|
|
|
-
|
|
|
|
3,439
|
|
Interest expense – amortization of convertible note discount
|
|
|
2,554
|
|
|
|
-
|
|
|
|
2,554
|
|
Changes in fair value of convertible note
|
|
|
7,720
|
|
|
|
-
|
|
|
|
7,720
|
|
Accounts payable
|
|
|
11,946
|
|
|
|
-
|
|
|
|
11,946
|
|
Deposit
|
|
|
-
|
|
|
|
44,522
|
|
|
|
44,522
|
|
Net cash provided by operating activities
|
|
|
186
|
|
|
|
-
|
|
|
|
186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
186
|
|
|
|
-
|
|
|
|
186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, Beginning of period
|
|
|
9,299
|
|
|
|
-
|
|
|
|
9,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, End of period
|
|
$
|
9,485
|
|
|
$
|
-
|
|
|
$
|
9,485
|
|
The adjustment column for the condensed
consolidated financial statements includes the following changes as of March 31, 2017 and for the three months ended March 31,
2017.
|
●
|
The balance sheet reflects no changes to total shareholders’
deficit. This is the result of a decrease of $177,493 to the additional paid-in capital at the end of the period and a $ 177,493
increase to the accumulated deficit.
|
|
●
|
The statement of operations reflects an increase of net
income by $177,493. This is made up of an increase in other income of $177,493 from the gain on the sales of subsidiary.
|
|
●
|
The statement of cash flow reflects no change to net cash
provided by operating activities. This is the result of an increase of $177,493 from the gain on the sales of subsidiary, $222,015
decrease to change in deposit balance and $44,522 increase to deposit balance for the three months ended March 31, 2017.
|
NOTE 14 –SUBSEQUENT EVENTS
ASC 855, “Subsequent
Events. ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. During these periods, other than as set forth above,
the Company did not have any material recognizable subsequent events required to be disclosed other than those disclosed in this
note to the financial statements as of and for quarter ended March 31, 2017.