NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note
1 – BASIS OF PRESENTATION AND ORGANIZATION
2050
Motors, Inc., (the “Company”) was incorporated on October 9, 2012, in the state of Nevada to import, market, and sell
electric cars manufactured in China. On October 25, 2012, 2050 Motors, Inc., entered into an agreement with Jiangsu Aoxin New
Energy Automobile Co., Ltd., (“Aoxin”), located in Jiangsu, China, for the distribution in the United States of a
new electric automobile, known as the e-Go EV.
Note
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements were prepared in conformity with generally accepted accounting principles in the United States
of America (“US GAAP”).
Use
of Estimates
The
preparation of financial statements in conformity with US GAAP requires management to make certain estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates. Significant estimates include collectability of accounts receivable, accounts payable, sales returns and recoverability
of long-term assets.
Cash
Cash
consists of deposits in one large national bank. At March 31, 2018 and December 31, 2017, the Company had $22,136 and $499 in
cash in the United States. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks
on its cash in bank accounts.
Property,
Plant & Equipment
Property,
plant and equipment is stated at cost and depreciated using the straight-line method over the estimated useful life of the asset;
lease hold improvements are depreciated over the shorter of estimated useful life of the asset or over the lease term. The estimated
useful lives of our property and equipment are generally as follows: tools and equipment, five years; vehicles and parts, three
years; leasehold improvements, lesser of lease term or life of related asset; and furniture and fixtures, seven years.
As
of March 31, 2018 and December 31, 2017, Property, plant and equipment consisted of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Furniture and furnishings
|
|
$
|
14,303
|
|
|
$
|
14,303
|
|
Leasehold improvements
|
|
|
18,184
|
|
|
|
18,184
|
|
Vehicle and parts
|
|
|
76,045
|
|
|
|
76,045
|
|
Tools and equipment
|
|
|
22,494
|
|
|
|
22,494
|
|
Total
|
|
|
131,026
|
|
|
|
131,026
|
|
Less: Accumulated
depreciation
|
|
|
(106,152
|
)
|
|
|
(99,350
|
)
|
Property, plant
and equipment, net
|
|
$
|
24,874
|
|
|
$
|
31,676
|
|
Depreciation
expense was $6,803 and $9,463 for the three month periods ended March 31, 2018 and 2017, respectively.
Fair
Value of Financial Instruments
For
certain of the Company’s financial instruments, including cash accounts payable, accrued liabilities, short-term debt and
derivative liability, the carrying amounts approximate their fair values due to their short maturities. We adopted ASC Topic 820,
“Fair Value Measurements and Disclosures,”, which requires disclosure of the fair value of financial instruments held
by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation
hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying
amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a
reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their
expected realization and their current market rate of interest. The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs
(level 3 measurements). The three levels of valuation hierarchy are defined as follows:
Level
1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that
are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level
3 inputs to the valuation methodology are unobservable in which little or no market data exists, therefore requiring an entity
to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or
significant value drivers are unobservable.
The
Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities
from Equity,” and ASC 815.
We
have recorded the conversion option on few notes as a derivative liability as a result of the variable conversion price, which
in accordance with U.S. GAAP, prevents them from being considered as indexed to our stock and qualified for an exception to derivative
accounting.
We
recognize derivative instruments as either assets or liabilities on the accompanying balance sheets at fair value. We record changes
in the fair value of the derivatives in the accompanying statement of operations.
Assets
and liabilities measured at fair value are as follows as of March 31, 2018:
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liability
|
|
$
|
2,058,527
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,058,527
|
|
Total
liabilities measured at fair value
|
|
$
|
2,058,527
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,058,527
|
|
Assets
and liabilities measured at fair value are as follows as of December 31, 2017:
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liability
|
|
$
|
1,030,132
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,030,132
|
|
Total
liabilities measured at fair value
|
|
$
|
1,030,132
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,030,132
|
|
The
following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair
value:
Balance as of December 31,
2016
|
|
$
|
270,075
|
|
Fair value of derivative
laibilities issued
|
|
|
717,999
|
|
Gain
on change in derivative liabilities
|
|
|
42,058
|
|
Balance as of December 31, 2017
|
|
|
1,030,132
|
|
Fair value of derivative
laibilities issued
|
|
|
184,573
|
|
Loss on change in derivative
liabilities
|
|
|
1,064,317
|
|
Derivative liabilities
reversed to APIC
|
|
|
(263,395
|
)
|
Warrants/options
reclassified from APIC to derivative liability
|
|
$
|
42,900
|
|
Balance as of
March 31, 2018
|
|
$
|
2,058,527
|
|
Earnings
Per Share (EPS)
Basic
EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding
for the period. Diluted EPS is computed similar to basic net income per share except that the denominator is increased to include
the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock
options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive
convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method for
the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock
method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later),
and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted
method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at
the time of issuance, if later). During the three month periods ended March 31, 2018 and 2017, the Company incurred losses. Therefore,
the effect of any common stock equivalents is anti- dilutive during those periods.
The
following table sets for the computation of basic and diluted earnings per share for the three month periods ended March 31, 2018
and 2017:
|
|
2018
|
|
|
2017
|
|
Basic and diluted
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,491,467
|
)
|
|
$
|
(48,588
|
)
|
Weighted
average number of shares in computing basic and diluted net loss
Basic
|
|
|
75,518,883
|
|
|
|
37,318,395
|
|
Diluted
|
|
|
75,518,883
|
|
|
|
37,318,395
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share basic and diluted
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.00
|
)
|
Revenue
Recognition
Revenue
Recognition:
The
company recognizes revenues when control of the promised goods or services is transferred to our customers in an amount that reflects
the consideration we expect to be entitled to in exchange for those good or services. The Company has not generated revenues since
inception.
In
May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which
supersedes all existing revenue recognition requirements, including most industry specific guidance. This new standard requires
a company to recognize revenues when it transfers goods or services to customers in an amount that reflects the consideration
that the company expects to receive for those goods or services. The FASB subsequently issued the following amendments to ASU
No. 2014-09 that have the same effective date and transition date: ASU No. 2016-08, Revenue from Contracts with Customers (Topic
606): Principal versus Agent Considerations; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance
Obligations and Licensing; ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical
Expedients; and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The
Company adopted these amendments with ASU 2014-09 (collectively, the new revenue standards).
The
new revenue standards became effective for the Company on January 1, 2018, and were adopted using the modified retrospective method.
The adoption of the new revenue standards as of January 1, 2018 did not change the Company’s revenue recognition as the
majority of its revenues continue to be recognized when the customer takes control of its product. As the Company did not identify
any accounting changes that impacted the amount of reported revenues with respect to its product revenues, no adjustment to retained
earnings was required upon adoption.
Cost
of Sales
Cost
of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), shipping,
importation duties and charges, third party royalties, and product sampling.
Advertising
and Marketing Costs
Costs
incurred for producing and communicating advertising and marketing are expensed when incurred and included in selling general
and administrative expenses. Advertising and marketing expense amounted to $0 and $0 for the three month periods ended March 31,
2018 and 2017, respectively
Operating
Overhead Expense
Operating
overhead expense consists primarily of payroll and benefit related costs, rent, depreciation and amortization, professional services,
and meetings and travel.
Income
Taxes
The
Company utilizes FASB Accounting Standards Codification (ASC) Topic 740, Income Taxes, which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events that were included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between
the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC
740 provide accounting and disclosure guidance about positions taken by an organization in its tax returns that might be uncertain.
When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities,
while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available
evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions
that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50
percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated
with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax
benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing
authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties
are classified in selling, general and administrative expenses in the statements of income.
At
March 31, 2018 and December 31, 2017, the Company had not taken any significant uncertain tax positions on its tax returns for
year ended December 31, 2017 and prior years or in computing its tax provision for 2017. Management has considered its tax positions
and believes that all of the positions taken by the Company in its Federal and State tax returns are more likely than not to be
sustained upon examination. The Company is subject to examination by U.S. Federal and State tax authorities from inception to
present, generally for three years after they are filed.
Concentration
of Credit Risk
Cash
is mainly maintained by one highly qualified institution in the United States. At various times, such amounts are in excess of
federally insured limits. Management does not believe that the Company is subject to any unusual financial risk beyond the normal
risk associated with commercial banking relationships. The Company has not experienced any losses on our deposits of cash.
Risks
and Uncertainties
The
Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated
with financing, liquidity requirements, rapidly changing customer requirements, limited operating history and the volatility of
public markets.
Recently
Issued Accounting Pronouncements
In
February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires an entity to
recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.
For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim
periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. We are evaluating
the impact this guidance will have on our financial position and statement of operations.
Reclassification
Certain
prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no
effect on the reported results of operations or cash flow.
Note
3 – GOING CONCERN
The
accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United
States of America, which contemplate the continuation of the Company as a going concern. The Company reported accumulated deficit
of $5,550,715 as of March 31, 2018. The Company also had a negative working capital of $2,485,925 and $1,477,483 for the three
month periods ended March 31, 2018 and for the year ended December 31, 2017, respectively. To date, these losses and deficiencies
have been financed principally through the issuance of common stock, loans from related parties and from third parties.
In
view of the matters described, there is substantial doubt as to the Company’s ability to continue as a going concern without
a significant infusion of capital. We anticipate that we will have to raise additional capital to fund operations over the next
12 months. To the extent that we are required to raise additional funds to acquire properties, and to cover costs of operations,
we intend to do so through additional offerings of debt or equity securities. There are no commitments or arrangements for other
offerings in place, no guaranties that any such financings would be forthcoming, or as to the terms of any such financings. Any
future financing will involve substantial dilution to existing investors.
Note
4 – VEHICLE DEPOSITS
Vehicle
deposit of $24,405, as of March 31, 2018 and December 31, 2017, represents one prototype test model for delivery into the United
States when the specifications are completed for an advanced crash test known in the Automobile Safety Industry as the “overlap
crash test”. The estimated date set for this test is mid-2018.
Note
5 – LICENSE AGREEMENT
In
2012 and 2013, the Company made a total payment of $50,000 and signed an exclusive license agreement with Aoxin to import, assemble
and manufacture the advanced carbon fiber electric vehicle, the e-Go EV model. The cost of this license agreement has been recognized
as a long-term asset and is evaluated, by management, for impairment losses at each reporting period. As of March 31, 2018 and
December 31, 2017, impairment losses of $50,000 and 0, respectively, have been identified by the management.
Note
6 – LOANS PAYABLE DUE TO RELATED PARTIES
On
July 1, 2017, the Company entered into an unsecured loan payable agreement with a related party for $14,100, due on September
15, 2017. The Company granted the related party an option to purchase up to 1,000,000 shares of common stock at an exercise price
of $0.015 per share. The fair market value of the options was $26,746. A debt discount of $14,100 was amortized over the term
of the loan. The Company also agreed to pay $1,500 as an interest on the loan. On September 27, 2017, the Company entered into
a note amendment, whereby, the term of the note was extended until November 1, 2017, in exchange for an additional $1,500 finance
fee and $1,500 late fee. The Company recorded the same as interest expense. As of March 31, 2018, the loan is in default and the
outstanding balance of the loan, as of March 31, 2018 and December 31, 2017 was $17,100. The Company accrued a penalty interest
of $1,750 plus $100 per day of default totaling $25,968 and $16,698 as of March 31, 2018 and December 31, 2017, respectively.
Interest expense for the three months ended March 31, 2018 and 2017 was $9,000 and $0, respectively. In accordance with ASC 815,
one million options were reclassified from equity to derivative liabilities with a fair value of $4,300 and a derivative loss
of $9,800.
On
September 27, 2017, the Company entered into another unsecured loan payable agreement with the same related party for $17,500,
due on November 1, 2017. The loan holder charged $1,750 as funding fee and $1,650 as processing fee for the loan, which were recorded
as debt discount, with net loan proceeds of $14,100. The Company also granted the related party an option to purchase up to 1,000,000
shares of common stock at an exercise price of $0.015 per share. The fair market value of the options was $22,945. The Company
amortized the debt discount of $14,100 and the finance fee of $3,400, over the term of the loan. In accordance with ASC 815, one
million options were reclassified from equity to derivative liabilities with a fair value of $5,800 and a derivative loss of $8,300.
As of March 31, 2018, the loan is in default and the outstanding balance of the loan, as of March 31, 2018 and December 31, 2017
was $17,500. The Company accrued a penalty interest of $1,750 plus $100 per day of default totaling $23,100 and $14,100 as of
March 31, 2018 and December 31, 2017, respectively. Interest expense for the three months ended March 31, 2018 and 2017 was $9,000
and $0, respectively. During the three month periods ended March 31, 2018 and 2017, the Company accrued $9,000 and $0 as a penalty
in the accompanying financial statements.
The
Company determined the derivative liability of the options using the Binomial model. The variables used for the Binomial model
are as listed below:
|
●
|
Volatility:
253%
|
|
|
|
|
●
|
Risk
free rate of return: 1.73% - 1.93%
|
|
|
|
|
●
|
Expected
term: 3-6 months
|
The
Company received an unsecured $10,000 loan during the third quarter of 2016 from a related party. The loan bears 12% interest
and on March 16, 2017, the original maturity date, an extension was granted to April 1, 2018. The outstanding balance on the loan
as of March 31, 2018 and December 31, 2017 was $10,000. The Company recorded accrued interest of $1,845 and $1,549 as of March
31, 2018 and December 31, 2017, respectively. Interest expense for the three months ended March 31, 2018 and 2017 was $296 and
$0, respectively.
Note
7 – CONVERTIBLE NOTE PAYABLES
|
(A)
|
On
November 1, 2016, the Company entered into four unsecured convertible promissory notes with three unrelated parties. The principle
amount is $10,000 for each note and carries interest of 12% annum. All four notes mature on April 30, 2017. The notes may
be converted into common stock of the Company at any time by the election of the lender at a conversion price of $0.075 per
share. The Company recorded a debt discount of $16,000 for the difference in the conversion price and the fair market value
on the date of agreement. The debt discount is being amortized over the term of the notes. On April 30, 2017, the Company
extended the term of the four notes by 90 days until July 29, 2017. The remaining debt discount of $8,000 was amortized over
the extended term. As of March 31, 2018 and December 31, 2017, the outstanding balance on the four notes amounted to $40,000.
Accrued interest totaled $4,400 and $3,200 as of March 31, 2018 and December 31, 2017, respectively. Interest expense was
$1,200 for the three months ended March 31, 2018 and 2017. The loans were in default as of March 31, 2018 and December 31,
2017. Subsequent to March 31, 2018, the note holders converted the principal balance of $40,000 and the accrued interest of
$4,800 for 18,000,000 shares of common stock.
|
|
|
|
|
(B)
|
On
October 26, 2016, the Company entered into an unsecured convertible note agreement, with an accredited investor, for $65,000.
The note bears interest at 12% per annum and is due and payable on July 26, 2017. The note has financing cost of $9,500 associated
with it. This deferred financing fee has been deducted directly from the carrying value of the note, pursuant to ASU 2015-03.
The deferred financing fee is being amortized over the term of the convertible note payable. The Company may prepay the note
in full together with any accrued and unpaid interest plus any applicable pre-payment premium set forth in the note. Until
the Ninetieth (90th) day after the Issuance Date the Company may pay the principal at a cash redemption premium of 135%, in
addition to outstanding interest, which can be paid without the Holder’s consent; from the 90th day to the One
Hundred and Twentieth (120th) day after the Issuance Date, the Company may pay the principal at a cash redemption premium
of 140%, in addition to outstanding interest, which can be paid without the Holder’s consent; from the 12th day
to the One Hundred and Eightieth (180th) day after the Issuance Date, the Company may pay the principal at a cash redemption
premium of 145%, in addition to outstanding interest, which can be paid without the Holder’s consent. After the 180th day
up to the Maturity Date this Note shall have a cash redemption premium of 150% of the then outstanding principal amount of
the Note, plus accrued interest and Default Interest if any, which may only be paid by the Company upon Holder’s prior
written consent The note is convertible into fully paid and non-assessable shares of common stock, after 180 days from the
date of the note, at a conversion price which is lower of: (i) a 50% discount to the lowest trading price during the previous
twenty trading days prior to the date of a conversion notice; or (ii) a 50% discount to the lowest trading price during the
previous twenty trading days before the date that this note was executed. Since the conversion price of the note is variable,
the conversion option has been treated as a derivative liability. The derivative liability on the note was calculated, using
the Binomial model, to be $242,450, of which $55,500 was recorded as a debt discount and the balance $186,950 was recorded
as an interest expense, at inception.
|
On
April 25, 2017, the Company entered into a note amendment whereby, the maturity of the note was extended to January 26, 2018 and
the principal was increased by $7,800 to $72,800. The Company wired $33,118 to the note holder as loan extension fee. The additional
finance fee of $7,800 was amortized over the remaining term of the note.
During
the year ended December 31, 2017, the note holder converted $23,600 of the note pursuant to two separate conversion notices. The
Company issued 2,911,195 shares of common stock to effect the conversions and recorded a loss on debt settlement of $5,786 for
the shares issued in excess of the agreed conversion price.
During
the three month period ended March 31, 2018, the note holder converted $32,286 of the principal of the note, pursuant to four
separate conversion notices into 12,681,921 shares of common stock to effect the conversions and recorded a loss on debt settlement
of $6,902 for the difference with the agreed conversion price. The derivative liability of $114,796, related to the converted
portion, was reclassed to additional paid in capital.
The
note was due on January 26, 2018 and is currently in default. All remaining finance fee and debt discount were amortized over
the term of the note. The derivative liability for the remaining note was recalculated on March 31, 2018 to be $101,479. The change
in derivative liability of $41,343 was recorded on the accompanying financial statements.
The
Company amortized a debt discount of $4,202 and $18,500, respectively, during the three month periods ended March 31, 2018 and
2017. The Company amortized the finance fee of $2,869 and $3,167, respectively, during the three month periods ended March 31,
2018 and 2017. Interest expense totaled $951 and $1,950 respectively, during the three month periods ended March 31, 2018 and
2017. As of March 31, 2018 and December 31, 2017, the outstanding balance on the convertible note payable amounted to $16,913
and $49,200, respectively. Accrued interest totaled $10,464 and $9,513 as of March 31, 2018 and December 31, 2017, respectively.
Subsequent to March 31, 2018, the note holder converted $6,871 of the principal balance into 4,580,800 shares of common stock.
|
(C)
|
On
January 6, 2017, the Company entered into an unsecured convertible note agreement with a third party for $78,750. The Company
received $70,000, net of the financing fee of $8,750. This deferred financing fee has been deducted directly from the carrying
value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible
note payable. The note is due on October 6, 2017 and carries interest at the rate of 12% per annum. In the event of default,
the amount of principal and interest not paid when due will bear interest of 22% per annum. Should an event of default occur,
the Company is liable to pay 150% of the then outstanding principal and interest. The note agreement also contains certain
covenants, if breached, the Company is liable for additional penalties. The note is convertible at the lower of; (i) a 50%
discount to the lowest trading price during the previous twenty five trading days prior to the date of a conversion notice;
or (ii) a 50% discount to the lowest trading price during the previous twenty five trading days before the date that this
note was executed. Since the conversion price of the note is variable, the conversion option has been treated as a derivative
liability. The derivative liability on the note was calculated, using the Binomial model, to be $137,118, of which $70,000
was recorded as a debt discount and the balance $67,118 was recorded as an interest expense, at inception.
|
On
June 30, 2017, the Company entered into a note amendment agreement to increase the principal balance of the note by $14,100 to
$92,850. The Company paid the $14,100 to the holder on July 6, 2017, to delay conversion option until September 5, 2017, pursuant
to the amended terms. On September 27, 2017, the Company entered into another note amendment agreement to increase the principal
balance of the note by $21,100 to $99,850. The Company wired $14,100 on September 27, 2017, to reduce the principal balance of
the note to $85,750. The note holder effected conversion of accrued interest of $7,006 into 1,946,000 shares of common stock.
The Company recorded a loss on debt settlement of $34,837 for the shares issued in excess of the agreed conversion price.
During
the three month period ended March 31, 2018, the note holder converted $12,319 of the note plus unpaid accrued interest of $9,351,
pursuant to four separate conversion notices into 14,501,000 shares of common stock to effect the conversions and recorded a loss
on debt settlement of $5,700 for the difference with the agreed conversion price. The derivative liability of $53,104, related
to the converted portion, was reclassed to additional paid in capital.
The
note was due on February 6, 2018 and is currently in default and a default penalty of $35,000 was added to the note principal
as of the issue date for a total of $113,750. As of March 31, 2018, the outstanding principal and interest was $109,943 which
includes a default interest rate of 22%. The Company accrued additional penalties and interest of approximately $264,000 related
to the breach of covenants. All remaining finance fee and debt discount were amortized over the term of the note. The derivative
liability for the remaining note was recalculated on March 31, 2018 to be $1,221,589. The change in derivative liability of $905,047
was recorded on the accompanying financial statements.
The
Company amortized a debt discount of $534 and $21,538, respectively, during the three month periods ended March 31, 2018 and 2017.
The Company amortized the finance fee of $5,246 and $2,692, respectively, during the three month periods ended March 31, 2018
and 2017. Interest expense totaled $4,401 and $2,175 respectively, during the three month periods ended March 31, 2018 and 2017.
As of March 31, 2018 and December 31, 2017, the outstanding principal and interest on the convertible note payable amounted to
$109,943 and $85,750, respectively. Subsequent to March 31, 2018, the note holder converted $1,898 of the principal balance and
$1,460 of the accrued interest into 4,664,900 shares of common stock.
|
(D)
|
On
April 21, 2017, the Company entered into an unsecured convertible note agreement with a third party for $58,000. The Company
received $55,000, net of the financing fee of $3,000. This deferred financing fee has been deducted directly from the carrying
value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible
note payable. The note is due on January 30, 2018 and carries interest at the rate of 12% per annum. The note is convertible
at any time starting after the first 180 days of the note and ending on the later of the maturity date or the date of payment.
The note is convertible at 61% of the Market Price. Market price shall mean the average of the lowest two trading prices during
the last fifteen trading day period completed on the latest trading day prior to the conversion. Since the conversion price
of the note is variable, the conversion option has been treated as a derivative liability. The derivative liability on the
note was calculated, using the Binomial model, to be $85,380, of which $55,000 was recorded as a debt discount and the balance
$30,380 was recorded as an interest expense, at inception.
|
During
the year ended December 31, 2017, the note holder converted $35,000 of the note for 4,106,274 shares of common stock. The Company
recorded a gain on settlement of $1,528, for the difference in the conversion price.
During
the three month period ended March 31, 2018, the note holder converted balance $23,000 of the note plus unpaid accrued interest
of $3,480, pursuant to three separate conversion notices. The Company issued 5,375,889 shares of common stock to effect the conversions
and recorded a gain on debt settlement of $2,079 for the difference with the agreed conversion price. The remaining finance fee
of $191 and remaining debt discount of $2,323 was amortized on the conversion of the note. The related derivative liability of
$21,366 was reclassed to additional paid in capital on the conversion of the note.
The
Company amortized a debt discount of $2,323 and $0 during the three month periods ended March 31, 2018 and 2017. The Company amortized
the finance fee of $191 and $0, respectively, during the three month periods ended March 31, 2018 and 2017. Interest expense was
$0 respectively, during the three month periods ended March 31, 2018 and 2017. As of March 31, 2018 and December 31, 2017, the
outstanding balance on the convertible note payable amounted to $0 and $23,000, respectively.
|
(E)
|
On
May 31, 2017, the Company entered into an unsecured convertible note agreement with a third party for $28,000. The Company
received $25,000, net of the financing fee of $3,000. This deferred financing fee has been deducted directly from the carrying
value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible
note payable. The note is due on March 15, 2018 and carries interest at the rate of 12% per annum. The note is convertible
at any time starting after the first 180 days of the note and ending on the later of the maturity date or the date of payment.
The note is convertible at 61% of the Market Price. Market price shall mean the average of the lowest two trading prices during
the last fifteen trading day period completed on the latest trading day prior to the conversion. Since the conversion price
of the note is variable, the conversion option has been treated as a derivative liability. The derivative liability on the
note was calculated, using the Binomial model, to be $37,967, of which $25,000 was recorded as a debt discount and the balance
$12,967 was recorded as an interest expense, at inception.
|
|
|
During
the three month period ended March 31, 2018, the note holder converted the note principal balance of $28,000 plus unpaid accrued
interest of $1,680, pursuant to four separate conversion notices. The Company issued 7,188,190 shares of common stock to effect
the conversions and recorded a loss on debt settlement of $858 for the difference with the agreed conversion price. The remaining
finance fee of $771 and remaining debt discount of $6,424 was amortized to interest expense on the conversion of the note.
The related derivative liability of $21,421 was reclassed as additional paid in capital on the note conversion. As of March
31, 2018 and December 31, 2017, the outstanding balance on the convertible note payable amounted to $0 and $28,000, respectively.
|
|
|
|
|
(F)
|
On
July 25, 2017, the Company entered into an unsecured convertible note agreement with a third party for $28,000. The Company
received $25,000, net of the financing fee of $3,000. This deferred financing fee has been deducted directly from the carrying
value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible
note payable. The note is due on April 30, 2018 and carries interest at the rate of 12% per annum. The note is convertible
at any time starting after the first 180 days of the note and ending on the later of the maturity date or the date of payment.
The note is convertible at 51% of the Market Price. Market price shall mean the average of the lowest two trading prices during
the last fifteen trading day period completed on the latest trading day prior to the conversion. Since the conversion price
of the note is variable, the conversion option has been treated as a derivative liability. The derivative liability on the
note was calculated, using the Binomial model, to be $48,934, of which $25,000 was recorded as a debt discount and the balance
$23,934 was recorded as an interest expense, at inception.
|
|
|
|
|
|
During
the three month period ended March 31, 2018, the note holder converted the note principal balance of $28,000 plus unpaid accrued
interest of $1,680, pursuant to four separate conversion notices. The Company issued 10,543,114 shares of common stock to
effect the conversions and recorded a gain on debt settlement of $4,512 for the difference with the agreed conversion price.
The remaining finance fee of $1,290 and remaining debt discount of $10,753 was amortized to interest expense on the conversion
of the note. The related derivative liability of $42,702 was reclassed as additional paid in capital on the note conversion.
As of March 31, 2018 and December 31, 2017, the outstanding balance on the convertible note payable amounted to $0 and $28,000,
respectively.
|
|
(G)
|
On
November 13, 2017, the Company entered into an unsecured convertible note agreement with a third party for $19,181. The Company
received $18,681, net of the financing fee of $500. This deferred financing fee has been deducted directly from the carrying
value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible
note payable. The note is due on August 30, 2018 and carries interest at the rate of 12% per annum. The note is convertible
at any time starting after the first 180 days of the note and ending on the later of the maturity date or the date of payment.
The note is convertible at 51% of the Market Price. Market price shall mean the average of the lowest two trading prices during
the last fifteen trading day period completed on the latest trading day prior to the conversion. Since the conversion price
of the note is variable, the conversion option has been treated as a derivative liability. The derivative liability on the
note was calculated, using the Binomial model, to be $46,163, of which $18,681 was recorded as a debt discount and the balance
$27,482 was recorded as an interest expense, at inception. The derivative liability was recalculated on December 31, 2017
as $26,745 and the difference in the value was recorded as a change in derivative liability in the income statement.
|
The
derivative liability was recalculated on March 31, 2018 as $42,983 and the difference in the value was recorded as a change in
derivative liability in the income statement. The Company amortized a debt discount of $5,798 during the three month period ended
March 31, 2018. The Company amortized the finance fee of $155 during three month period ended March 31, 2018. Interest expense
of $568 was accrued on the convertible note during the three month period ended March 31, 2018. As of March 31, 2018, the balance
outstanding on the loan was $19,181 plus accrued interest of $870. The loan is due on August 30, 2018.
The
variables used for the Binomial model are as listed below:
December
31, 2017
|
|
March
31, 2018
|
|
|
|
Volatility: 253%
|
|
Volatility: 285%
|
Risk free rate of return: 1.76%
|
|
Risk free rate of return: 1.73%
|
Expected term: 242 days
|
|
Expected term: 152 days
|
|
(H)
|
On
September 15, 2017, the Company entered into an unsecured convertible note agreement with a third party for $25,000. The Company
received $22,500, net of the financing fee of $2,500. This deferred financing fee has been deducted directly from the carrying
value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible
note payable. The note is due on September 15, 2018 and carries interest at the rate of 10% per annum. The Company also granted
a warrant with the convertible note to buy 250,000 shares of common stock of the Company at an exercise price of $0.10 per
share. The Company valued the warrants using the black scholes option pricing model at $14,700, which was recorded as a debt
discount. The note is convertible at any time starting after the first 180 days of the note and ending on the later of the
maturity date or the date of payment. The note is convertible at 61% of the Market Price. Market price shall mean the average
of the lowest two trading prices during the last fifteen trading day period completed on the latest trading day prior to the
conversion. Since the conversion price of the note is variable, the conversion option has been treated as a derivative liability.
The derivative liability on the note was calculated, using the Binomial model, to be $113,636, of which $7,800 was recorded
as a debt discount and the balance $105,836 was recorded as an interest expense, at inception. The derivative liability was
recalculated on December 31, 2017 as $59,596 and the difference in the value was recorded as a change in derivative liability
in the income statement.
|
During
the three month period ended March 31, 2018, the note holder converted $4,198 of the note principal balance, pursuant to a conversion
notice into 4,664,000 shares of common stock to effect the conversions and recorded a loss on debt settlement of $8,480 for the
difference with the agreed conversion price. The related debt discount of $2,670 and related finance fee of $297 were also amortized.
The related derivative liability on the converted portion of the note of $10,006 was reclassed as additional paid in capital on
the note conversion. In accordance with ASC 815, 250,000 warrants were reclassified from equity to derivative liabilities with
a fair value of $1,100 and a derivative loss of $13,600.
The
derivative liability was recalculated on March 31, 2018 as $52,791 and the difference in the value was recorded as a change in
derivative liability in the income statement. The Company amortized additional debt discount of $3,263 during the three month
period ended March 31, 2018. The Company amortized additional finance fee of $363 during the three month period ended March 31,
2018. Interest expense was $612 for the three month period ended March 31, 2018. As of March 31, 2018 and December 31, 2017, the
balance outstanding on the loan was $20,802 and $25,000, respectively. Accrued interest was $1,340 and $728 as of March 31, 2018
and December 31, 2017, respectively. The loan is due on September 15, 2018.
The
variables used for the Binomial model are as listed below:
December
31, 2017
|
|
March
31, 2017
|
|
|
|
Volatility:
253%
|
|
Volatility:
253%
|
Risk
free rate of return: 1.76%
|
|
Risk
free rate of return: 1.93%
|
Expected
term: 258 days
|
|
Expected
term: 168 days
|
Subsequent
to March 31, 2018, the note holder converted $7,903 of the principal balance into 10,977,000 shares of common stock.
|
(I)
|
On
November 14, 2017, the Company entered into an unsecured convertible note agreement with a third party for $27,000. The Company
received $25,000, net of the financing fee of $2,000. This deferred financing fee has been deducted directly from the carrying
value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible
note payable. The note is due on November 14, 2018 and carries interest at the rate of 12% per annum. The note is convertible
at 50% of the Market Price. Market price shall mean the lowest trading price during the last fifteen trading day period prior
to the conversion. Since the conversion price of the note is variable, the conversion option has been treated as a derivative
liability. The derivative liability on the note was calculated, using the Binomial model, to be $65,378, of which $25,000
was recorded as a debt discount and the balance $40,378 was recorded as an interest expense, at inception. The derivative
liability was recalculated on December 31, 2017 as $73,800 and the difference in the value was recorded as a change in derivative
liability in the income statement.
|
The
derivative liability was recalculated on March 31, 2018 as $165,600 and the difference in the value was recorded as a change in
derivative liability in the income statement. The Company amortized a debt discount of $6,164 during the three month ended March
31, 2018. The Company amortized the finance fee of $493 during the three month ended March 31, 2018. Interest expense was $799
for the three month ended March 31, 2018. As of March 31, 2018 and December 31, 2017, the balance outstanding on the loan was
$27,000. Accrued interest was $1,216 and $417 at March 31, 2018 and December 31, 2017, respectively. The loan is due on November
14, 2018.
The
variables used for the Binomial model are as listed below:
December
31, 2017
|
|
March
31, 2018
|
|
|
|
Volatility:
253%
|
|
Volatility:
253%
|
Risk
free rate of return: 1.76%
|
|
Risk
free rate of return: 1.93%
|
Expected
term: 318 days
|
|
Expected
term: 228 days
|
|
(J)
|
On
January 24, 2018, the Company entered into an unsecured convertible note agreement with a third party for $35,000. The Company
received $33,000, net of the financing fee of $2,000. This deferred financing fee has been deducted directly from the carrying
value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible
note payable. The note is due on October 30, 2018 and carries interest at the rate of 12% per annum. The note is convertible
at any time starting after the first 180 days of the note and ending on the later of the maturity date or the date of payment.
The note is convertible at 61% of the Market Price. Market price shall mean the average of the lowest two trading prices during
the last fifteen trading day period completed on the latest trading day prior to the conversion. Since the conversion price
of the note is variable, the conversion option has been treated as a derivative liability. The derivative liability on the
note was calculated, using the Binomial model, to be $58,333, of which $33,000 was recorded as a debt discount and the balance
$25,333 was recorded as an interest expense, at inception.
|
The
derivative liability was recalculated on March 31, 2018 as $82,353 and the difference in the value was recorded as a change in
derivative liability in the income statement. The Company amortized a debt discount of $7,806 during the three month period ended
March 31, 2018. The Company amortized the finance fee of $473 during three month period ended March 31, 2018. Interest expense
of $759 was accrued on the convertible note during the three month period ended March 31, 2018. As of March 31, 2018, the balance
outstanding on the loan was $35,000.
The
variables used for the Binomial model are as listed below:
January
24, 2018
|
|
March
31, 2018
|
|
|
|
Volatility:
285%
|
|
Volatility:
285%
|
Risk
free rate of return: 1.79%
|
|
Risk
free rate of return: 1.93%
|
Expected
term: 279 days
|
|
Expected
term: 213 days
|
|
(K)
|
On
February 22, 2018, the Company entered into an unsecured convertible note agreement with a third party for $43,000. The Company
received $40,000, net of the financing fee of $3,000. This deferred financing fee has been deducted directly from the carrying
value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible
note payable. The note is due on November 30, 2018 and carries interest at the rate of 12% per annum. The note is convertible
at any time starting after the first 180 days of the note and ending on the later of the maturity date or the date of payment.
The note is convertible at 51% of the Market Price. Market price shall mean the average of the lowest two trading prices during
the last fifteen trading day period completed on the latest trading day prior to the conversion. Since the conversion price
of the note is variable, the conversion option has been treated as a derivative liability. The derivative liability on the
note was calculated, using the Binomial model, to be $104,549, of which $40,000 was recorded as a debt discount and the balance
$64,549 was recorded as an interest expense, at inception.
|
The
derivative liability was recalculated on March 31, 2018 as $103,585 and the difference in the value was recorded as a change in
derivative liability in the income statement. The Company amortized a debt discount of $5,267 during the three month period ended
March 31, 2018. The Company amortized the finance fee of $395 during three month period ended March 31, 2018. Interest expense
of $523 was accrued on the convertible note during the three month period ended March 31, 2018. As of March 31, 2018, the balance
outstanding on the loan was $43,000.
The
variables used for the Binomial model are as listed below:
February
22, 2018
|
|
March
31, 2018
|
|
|
|
Volatility:
285%
|
|
Volatility:
285%
|
|
|
|
Risk
free rate of return: 2.03%
|
|
Risk
free rate of return: 1.93%
|
|
|
|
Expected
term: 281 days
|
|
Expected
term: 244 days
|
|
(L)
|
On
February 12, 2016, the Company signed a twelve months revolving line of credit agreement with a related party. The line amount
is $100,000 and carries interest at 12% per annum. In January 2017, the Company signed an amendment to extend the due date
of the loan to June 30, 2018 for a conversion option for the restricted common stock of the Company.
|
During
the year ended December 31, 2017, the related party assigned $30,000 of the loan to an unrelated third party on the same terms.
The third party opted to convert $5,000 of the principal balance into 892,857 shares of common stock of the Company. The Company
recorded a loss on settlement of debt of $714, on the excess shares issued to the note holder. The derivative liability was recalculated
on December 31, 2017 as $62,222 on the loan assigned and the proportionate difference in the value was recorded as a change in
derivative liability in the income statement.
The
derivative liability was recalculated on March 31, 2018 as $65,000 and the difference in the value recorded as a change in derivative
liability in the income statement. The Company amortized a debt discount of $1,461 during the three month period ended March 31,
2018. Interest expense was $740 for the three month period ended March 31, 2018. As of March 31, 2018 and December 31, 2017, the
balance outstanding on the loan was $25,000. Accrued interest was $4,340 and $3,600 as of March 31, 2018 and December 31, 2017,
respectively. The loan was due on June 30, 2018 and as of the date of these financials remains unpaid.
Note
8 – COMMITMENTS AND CONTINGENCIES
Effective
March 1, 2014, the Company signed a lease for four thousand square feet of industrial space in North Las Vegas. The term of the
lease is for three years and cost $2,200 per month. The lease expired on April 30, 2017 and the Company is now on a month to month
lease Rent expense amounted to $6,800 and $6,417 for the three month periods ended March 31, 2018 and 2017, respectively.
According
to the license agreement signed between the Company and Aoxin, in order to maintain exclusive rights for the United States (US),
the Company is required to purchase and sell certain amount of e-Go EV model vehicles per year for a certain period of time starting
from the completion of the requirements established by the United States Department of Transportation’s protocols for the
e-Go EV model. The table below demonstrates the required amount of vehicles that the company needs to sell per year.
First year
|
|
|
2,000
|
|
Second year
|
|
|
6,000
|
|
Third year
|
|
|
12,000
|
|
Fourth year
|
|
|
24,000
|
|
Fifth year
|
|
|
48,000
|
|
|
|
|
92,000
|
|
As
part of the license agreement, the Company is committed to pay expenses related to any required airbag testing procedures. The
cost of these airbags could be as little as $500,000 or as much as $2 million.
The
Company may from time to time, become a party to various legal proceedings, arising in the ordinary course of business. The Company
investigates these claims as they arise. Management does not believe, based on current knowledge, that there were any such claims
outstanding as of March 31, 2018.
Note
9 – REVOLVING LINE OF CREDIT- RELATED PARTY
On
February 12, 2016, the Company signed a twelve months revolving line of credit agreement with a related party. The line amount
is $100,000 and carries interest at 12% per annum. In January 2017, the Company signed an amendment to extend the due date of
the loan to June 30, 2018 for a conversion option for the restricted common stock of the Company. The note carries interest at
the rate of 12% per annum and is convertible at any time starting from January 18, 2017 and ending on the later of the maturity
date or the date of payment. The note is convertible at 50% of the Average Market Price for the 15 previous trading days before
the conversion notice date. The derivative liability on the note was calculated, using the Binomial model, to be $227,760, of
which $101,400 was recorded as a debt discount and the balance $126,360 was recorded as an interest expense, at inception.
During
the year ended December 31, 2017, the related party assigned $30,000 of the loan to an unrelated third party on the same terms.
The derivative liability was recalculated on December 31, 2017 as $177,707 on the balance related party loan and the difference
in the value recorded as a change in derivative liability in the income statement.
During
the three month period ended March 31, 2018, the Company paid off $10,542 of the principal balance and $1,458 of the accrued interest.
The Company raised additional cash of $12,000 on the line of credit on the same terms. The derivative liability on the new money
raised was calculated, using the Binomial model, to be $21,691, of which $12,000 was recorded as a debt discount and the balance
$9,688 was recorded as an interest expense, at inception.
The
derivative liability was recalculated on March 31, 2018 as $213,050 and the difference in the value recorded as a change in derivative
liability in the income statement. The Company amortized a debt discount of $14,430 during the three month period ended March
31, 2018. Interest expense of $2,097 was accrued on the convertible loan during the three month period ended March 31, 2018. As
of March 31, 2018 and December 31, 2017, the balance outstanding on the loan was $69,942 and $81,942, respectively. Accrued interest
was $9,207 and $8,568 as of March 31, 2018 and December 31, 2017, respectively. The loan was due on June 30, 2018 and
remains unpaid.
Subsequent
to March 31, 2018, the loan holder converted $60,000 of the principal balance into 24,000,000 shares of common stock.
Note
10 – INCOME TAXES
The
Company did not file its federal tax returns for fiscal years from 2012 through 2017. Management believes that it should not have
any material impact on the Company’s financials because the Company did not have any tax liabilities due to net loss incurred
during these years.
Based
on the available information and other factors, management believes it is more likely than not that the net deferred tax assets
at March 31, 2018 and December 31, 2017 will not be fully realizable. Accordingly, management has recorded a full valuation allowance
against its net deferred tax assets at March 31, 2018 and December 31, 2017. At March 31, 2018 and December 31, 2017, the Company
had federal net operating loss carry-forwards of approximately $4,000,000, expiring beginning in 2032.
Deferred
tax assets consist of the following components:
|
|
March
31 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
Net loss carryforward
|
|
$
|
1,350,000
|
|
|
$
|
1,100,000
|
|
Valuation
allowance
|
|
|
(1,350,000
|
)
|
|
|
(1,100,000
|
)
|
Total deferred
tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Note
11 – EQUITY
During
the year ended December 31, 2016, the Company agreed to issue 3,200,000 shares for services at a price between $0.157 to $0.075,
for a total of $256,480. Additionally, the Company agreed to issue 825,000 shares of common stock for marketing services at a
per share price of $0.1497 for a total consideration of $125,000. As of March 31, 2018, these shares are yet to be issued and
have been recorded as common stock issuable.
The
Company also agreed to issue 200,000 shares of its common stock at $0.05 per share for $10,000 cash, during the year ended December
31, 2016. The shares were issued during the year ended December 31, 2017.
On
June 24, 2016, the Company issued a $75,000 non-refundable Promissory Note to an investor as a pre- condition to an Equity Purchase
Agreement. The promissory note bears 10% interest per annum with a one year maturity date. This note resulted in a $75,000 deferred
equity issuance cost and is being amortized over the contract period. During the year ended December 31, 2017 and 2016, respectively,
the Company recorded $37,500 and $18,750 in amortization of the deferred equity issuance costs for the Equity Purchase Agreement
(See Note 13). During the year ended December 31, 2017, the Company issued 1,500,000 shares for the conversion of the promissory
note along with interest accrued on the same of $6,574. The shares issued were recorded at the fair market value of $0.054 on
the date of conversion notice.
During
the year ended December 31, 2017, the Company increased the authorized share capital for common stock of the Company from 100
million to 300 million. During the year ended December 31, 2017, the Company increased the authorized share capital for preferred
stock of the Company from 0 to 10 million.
During
the year ended December 31, 2017, the Company issued 36,885 shares of company’s common stock, to a third party for $2,250
cash.
During
the year ended December 31, 2017, the Company issued 140,808 shares of company’s common stock, for payment of a related
party accounts payable totaling $8,589, including penalties.
During
the year ended December 31, 2017, the Company issued 177,694 shares of company’s common stock in exchange for consulting
and advisory services, valued at $10,840.
During
the year ended December 31, 2017, the Company issued 2,911,195 shares of company’s common stock, to partially convert $23,600
of a convertible note payable.
During
the year ended December 31, 2017, the Company issued 1,946,200 shares of common stock to effect conversion of accrued interest
on a convertible note of $7,006.
During
the year ended December 31, 2017, one of the note holder converted $35,000 of the note for 3,106,274 shares of common stock.
During
the year ended December 31, 2017, the Company issued 892,857 shares of company’s common stock, to partially convert $5,000
of a convertible note payable.
During
the year ended December 31, 2017, the Company agreed to issue 1,000,000 shares of common stock to a third party for $15,000 cash.
The shares were not issued as of December 31, 2017 and have been recorded as shares to be issued in the accompanying financial
statements.
During
the year ended December 31, 2017, the Company capitalized $48,000 as capital contribution by prior president of the Company, for
the accrued salary due to the prior president.
During
the year ended December 31, 2017, the Company entered into an unsecured loan payable agreement with a related party for $14,100,
due on September 15, 2017. The Company granted the related party an option to purchase up to 1,000,000 shares of common stock
at an exercise price of $0.015 per share. The Company valued the options using the black scholes options pricing model. The fair
market value of the options was $26,746. The value was restricted to the face value of the note and hence, $14,100 was recorded
as a debt discount and credited as additional paid in capital in the accompanying financials (See Note 7).
During
the year ended December 31, 2017, the Company entered into another unsecured loan payable agreement with the same related party
for $17,500, with net loan proceeds of $14,100. The Company also granted the related party an option to purchase up to 1,000,000
shares of common stock at an exercise price of $0.015 per share. The Company valued the options using the black scholes options
pricing model. The fair market value of the options was $22,945. The value was restricted to the net proceeds of the note and
hence, $14,100 was recorded as a debt discount and credited as additional paid in capital in the accompanying financials (See
Note 7).
During
the year ended December 31, 2017, the Company entered into an unsecured convertible note agreement with a third party for $25,000.
The Company received $22,500, net of the financing fee of $2,500. The Company also granted a warrant with the convertible note
to buy 250,000 shares of common stock of the Company at an exercise price of $0.10 per share. The Company valued the warrants
using the black scholes option pricing model at $14,700, which was recorded as a debt discount and credited as additional
paid in capital in the accompanying financials (See Note 7).
During
the three month ended March 31, 2018, the Company increased the authorized share capital of the Company from 300 million to 1
billion shares of common stock.
During
the three month ended March 31, 2018, the Company issued 3 million shares of preferred stock to the prior president of the Company
for services rendered during the quarter. A value of $45,000 was recorded in these financial statements.
During
the three month period ended March 31, 2018, the Company issued 54,954,114 shares of common stock to effect the conversions of
various convertible note payables and accrued interest on same and recorded a loss on debt settlement of $16,734 for the difference
with the agreed conversion price.
Note
12 – WARRANTS AND OPTIONS
As
of March 31, 2018, there were 2,000,000 options outstanding and exercisable, issued in relation with loans payable due to related
parties. Each whole share purchase option has an exercise price of $0.015 per common share. The options were evaluated for purposes
of classification between liability and equity and were reclassed from equity to derivative liability. The Binomial model was
used to estimate the fair value of $10,100 for the options. Following inputs were used for the Binomial model:
Options
|
|
|
2,000,000
|
|
Term
|
|
|
3-6
months
|
|
Exercise price
|
|
$
|
0.015
|
|
Volatility
|
|
|
285
|
%
|
Risk Free Interest Rate
|
|
|
1.73%-1.93
|
%
|
Fair Value
|
|
$
|
10,100
|
|
Activity
for the year ended December 31, 2017 and the three month period ended March 31, 2018 is as follows:
|
|
Number
of Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining Contract Term
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Granted
|
|
|
2,000,000
|
|
|
$
|
0.015
|
|
|
|
1.00
|
|
Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2017
|
|
|
2,000,000
|
|
|
$
|
0.015
|
|
|
|
0.63
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Outstanding at March 31, 2018
|
|
|
2,000,000
|
|
|
$
|
0.015
|
|
|
|
0.38
|
|
As
of March 31, 2018, there were 250,000 warrants outstanding and exercisable, issued in relation with a convertible note payable.
Each whole share purchase option has an exercise price of $0.10 per common share. The warrants were evaluated for purposes of
classification between liability and equity. The warrants contain features that would require a liability classification and are
therefore recorded as derivative liability. The Binomial model was used to estimate the fair value of $1,100 for the Warrants.
Following inputs were used for the Binomial model:
Warrants
|
|
|
250,000
|
|
Term
|
|
|
3
years
|
|
Exercise price
|
|
$
|
0.10
|
|
Volatility
|
|
|
285
|
%
|
Risk Free Interest Rate
|
|
|
2.33
|
%
|
Fair Value
|
|
$
|
1,100
|
|
Activity
for the year ended December 31, 2017 and the three months ended March 31, 2018 is as follows:
|
|
Number
of Warrants
|
|
|
Weighted
Average Exercise Price
|
|
|
Weighted
Average Remaining Contract
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Granted
|
|
|
250,000
|
|
|
$
|
0.10
|
|
|
|
3.00
|
|
Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2017
|
|
|
250,000
|
|
|
$
|
0.10
|
|
|
|
2.75
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Outstanding at March 31, 2018
|
|
|
250,000
|
|
|
$
|
0.10
|
|
|
|
2.50
|
|
Note
13 – SUBSEQUENT EVENTS
On
April 11, 2018, the Company borrowed $15,000 pursuant to a convertible note agreement bearing an interest rate of 12% per annum
and with a maturity date of January 30, 2019.
On
April 27, 2018, the Company borrowed $21,500 pursuant to a convertible note agreement bearing an interest rate of 12% per annum
and with a maturity date of February 15, 2019.
On
May 21, 2018, the Company received a demand letter on five (5) convertible promissory notes in favor of a single lender totaling
$133,581. Including accrued interest and accrued default interest, immediate demand payment of $200,371 was made. The default
was triggered by the Company’s failure to file its Form 10-Q for the period ending March 31, 2018, on its due date. The
Company is currently in negotiation with the lender to retract its demand upon the filing of its Form 10-Q.
On
various dates between May 3 and May 11, 2018, the Company issued 38,222,700 shares of common stock to effect conversion of $56,672
of convertible notes payable and $6,260 of accrued interest on the same (See Note 7).
On
May 4, 2018, the Company issued 36,640,000 shares of common stock to effect conversion of $31,600 of related party notes payable
(See Note 6) and $60,000 of related party line of credit (See Note 9).
On
May 4, 2018, the Company issued 6,000,000 shares of common stock for $15,000 cash.
On
May 4, 2018, the Company issued 5,000,000 shares of common stock for services totaling $12,500.
On
June 25, 2018, the Company received a legal notice demanding approximately $404,000, from the note holder for defaulting on the
convertible promissory loan dated January 6, 2017. The Company is still trying to negotiate the terms with the note holder.