Notes to the Financial Statements
NOTE 1- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. During the period from inception through December 31, 2017, the Company has generated minimal revenues and has an accumulated deficit of ($14,460,392). The continuation of the Company as a going concern is dependent upon the continued financial support from its management, its ability to generate profits from the Company
’
s future operations, identify future investment opportunities and obtain the necessary debt or equity financing. These factors raise substantial doubt regarding the Company
’
s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Accounting Methods
The Company
’
s financial statements are prepared using the accrual method of accounting. The Company has elected a calendar year-end.
Basic and Diluted Loss Per Share
The Company presents both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including convertible debt, stock options, and warrants, using the treasury stock method, and convertible securities, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. The Company had net losses as of December 31, 2017 so the diluted EPS excluded all dilutive potential shares in the diluted EPS because their effect is anti-dilutive. The Company had outstanding warrants to purchase 5,000,000 shares of common stock which expired November 2017. The Company also had outstanding notes of $63,500 and convertible notes of $603,361 that could be converted into additional shares as of December 31, 2017.
Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.
Fair Value of Financial Instruments
The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157),
“
Fair Value Measurements and Disclosures" for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:
- Level 1: Quoted prices in active markets for identical assets or liabilities.
- Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
- Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The carrying amounts of the Company
’
s financial instruments as of December 31, 2017, reflect:
Cash: Level 1 Measurement based on bank reporting.
Level 2 Loans from Officers and related parties
Level 2 Based on promissory notes.
Level 3 Derivative Liabilities
25
Derivative Liabilities
Certain of the Company
’
s convertible notes payable described in Note 4 contain conversion features that qualify for embedded derivative classification. The Company accounts for the embedded derivative features in its convertible debentures in accordance FASB ASC 815-10-
Derivatives and Hedging,
which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives. The recognition of derivative liabilities related to the issuance of the convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as a
“
Loss on Derivative Liability
”
in other expense. The fair value of these liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred, or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue. The Company accrues for warranty costs, sales returns, bad debts, and other allowances based on its historical experience. The Company has recognized minimal revenue since inception.
Income Taxes
Federal Income taxes are not currently due since we have had losses since inception.
On December 22, 2017 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the
“
Tax Act
”
) was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (
“
Federal Tax Rate
”
) from 35% to 21% effective January 1, 2018. The Company will compute its income tax expense for the years ended December 31, 2017 and 2016 using a Federal Tax Rate of 21%.
Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25
Income Taxes
–
Recognition.
Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the
“
more likely than not
”
standard required by ASC 740-10-25-5.
Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.
As of December 31, 2017, we had a net operating loss carry-forward of approximately $(4,825,315,314) and a deferred tax asset of approximately $1,0113,316 using the statutory rate of 21%. The deferred tax asset may be recognized in future periods, not to exceed 20 years. However, due to the uncertainty of future events we have booked valuation allowance of $(1,013,316). FASB ASC 740 prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, 2017, the Company had not taken any tax positions that would require disclosure under FASB ASC 740.
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|
|
|
|
|
|
December 31, 2017
|
December 31, 2016
|
Deferred Tax Asset
|
$ 1,013,316
|
$ 788,394
|
Valuation Allowance
|
(1,013,316)
|
(788,394)
|
Deferred Tax Asset (Net)
|
$ -
|
$ -
|
.
Although Management believes that its estimates are reasonable, no assurance can be given that the final tax outcome of these matters will not be different than that which is reflected in our tax provisions. Ultimately, the actual tax benefits to be realized will be based upon future taxable earnings levels, which are very difficult to predict.
26
No provision was made for federal income tax, since the Company had an overall net operating loss and has accumulated net operating loss carryforwards.
For the years ended December 31, 2017, and 2016, no income tax expense has been realized as a result of operations and no income tax penalties and/or interest have been accrued related to uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction and in the State of California. These filings are subject to a three-year statute of limitations. The Company
’
s evaluation of income tax positions included the years ended December 14 through 2016 could be subject to agency examinations. No filings are currently under examination. No adjustments have been made to reduce the estimated income tax benefit at fiscal year-end or at the quarterly reporting dates. Any valuations relating to these income tax provisions will comply with U.S. generally accepted accounting principles.
Stock-Based Compensation
The Company records stock-based compensation using the fair value method. Equity instruments issued to employees and the cost of the services received as consideration are accounted for in accordance with ASC 718
“
Stock Compensation
”
and are measured and recognized based on the fair value of the equity instruments issued. All transactions with non-employees in which goods or services are the consideration received for the issuance of equity instruments are accounted for in accordance with ASC 515
“
Equity-Based Payments to Non-Employees
”
, based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
New Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board (
“
FASB
”
) issued Accounting Standards Update (
“
ASU
”
) 2014-15
“
Presentation of Financial Statements
—
Going Concern,
”
outlining management
’
s responsibility to evaluate whether there is substantial doubt about an entity
’
s ability to continue as a going concern, along with the required disclosures. ASU 2014-15 is effective for the annual period ending after December 15, 2016 with early adoption permitted. The Company does not anticipate a material impact to our financial statements as a result of this change.
In January 2016, the FASB issued ASU 2016-01
“
Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,
”
which revises an entity
’
s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017, with early adoption permitted under certain circumstances.
”
The Company is currently assessing the impact of ASU 2016-01 on its financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 with early adoption permitted. Under Accounting Standards Update 2016-02, lessees will be required to recognize for all leases at the commencement date a lease liability, which is a lessee
’
s obligation to make lease payments arising from a lease measured on a discounted basis, and a right-to-use asset, which is an asset that represents the lessee
’
s right to use or control the use of a specified asset for the lease term. The Company is currently evaluating the effect that the new guidance will have on its financial statements and related disclosures.
In March 2016, the FASB issued ASU No. 2016-09, Compensation
—
Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including treatment of excess tax benefits and forfeitures, as well as consideration of minimum statutory tax withholding requirements. The ASU will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early application permitted in any interim or annual period. The Company is evaluating the future impact of this ASU on the financial statements.
In May 2017, the FASB amended authoritative guidance on modifications related to stock compensation, codified in ASC 718, Compensation - Stock Compensation. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. The guidance is effective for the Company as of the first quarter of its fiscal year ending January 31, 2019. The Company does not believe the update will have a material impact on its financial statements.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on the Company
’
s financial statements or its financial position or results of operations.
27
Long Lived Assets
Periodically the Company assesses potential impairment of its long-lived assets, which include property, equipment and acquired intangible assets, in accordance with the provisions of ASC Topic 360,
“
Property, Plant and Equipment.
”
The Company recognizes impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets
’
carrying values. An impairment loss would be recognized in the amount by which the recorded value of the asset exceeds the fair value of the asset, measured by the quoted market price of an asset or an estimate based on the best information available in the circumstances. There were no such losses recognized during 2017 or 2016.
Property, Equipment and Intangible Assets
Property and equipment are carried at cost, less accumulated depreciation. Additions are capitalized and maintenance and repairs are charged to expense as incurred. Intangible assets consist of acquired web site domains and web site content and are carried at cost, less accumulated amortization.
Depreciation and amortization is provided principally on the straight-line basis method over the estimated useful lives of the assets.
NOTE 2 - RELATED PARTY TRANSACTIONS
Management Services
As of December 31, 2017, the company owes Integrated Capital Partners, Inc. (Nevada) $70,596 in expenses paid for the Company. The Company
’
s former CEO (James Farinella) is the controlling shareholder of Integrated Capital Partners, Inc. (Nevada).
In February 2017 the Company
’
s then CEO, James Farinella, assigned his rights to the Voluptas provisional patents that he owns and all intellectual property rights to Voluptas for 2,350,000 preferred B shares of the Company. On May 10, 2017 the provisional patent was updated and re-filed increasing the protection covering more than 10 delivery methods. Mr. Farinella surrendered 120,000 Preferred B shares to pay off loans owed to three trust accounts and those trust accounts were issued 40,000 preferred C shares each. James Farinella now owns 2,890,000 preferred B shares of the Company. James Farinella also retired 8,425,000 common shares and now owns no common shares of the Company. As of December 31, 2017, the Company owes James M. Farinella the previous CEO, $3,036 in expenses paid for the Company.
In February 2017 the Company
’
s Chief Operating Officer, Gina Morreale, was issued 240,000 Preferred B shares. The Company agreed to issue these shares to Miss Morreale in 2016 for her joining the Company as an Officer and Director. Subsequently, Gina Morreale resigned as an officer and director of the Company and relinquished the 240,000 preferred B shares.
On August 4, 2016 the company issued 660,000 shares of preferred series B shares to RP Capital. Each preferred series B is convertible into 100 shares of the company
’
s common stock, for research and development services.
Revenue
In November and December of 2016, the Company sold 50 bottles of LUNA at $20 per bottle for a total of $1,000.
NOTE 3 - CONVERTIBLE PROMISSORY NOTES PAYABLE
On February 4, 2016, the Company entered into a $121,000 10% Convertible Promissory Note with Tangiers Investment Group, LLC, a non-affiliate. The term is for one year, with an original issuance discount of $11,000 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 50% of the lowest trading price of the Company
’
s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.
On March 23, 2016, the Company entered into a $60,500 10% Convertible Promissory Note with Vista Capital Investments, LLC. a non-affiliate. The term is for two years, with an original issuance discount of $5,500 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the lowest trading price of the Company
’
s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability. In connection with the note payable the Company is obligated to issue 200,000 shares of common stock that was valued at $120,000. Out of the full consideration $55,000 was recorded as debt discount and the remaining $65,000 was included in interest expense.
On March 24, 2016, the Company entered into a $60,500 10% Convertible Promissory Note with Tangiers Investment Group, LLC, a non-affiliate. The term is for one year, with an original issuance discount of $5,500 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the
28
lowest trading price of the Company
’
s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.
On December 5, 2016, the Company entered into a $79,000 10% Convertible Promissory Note with GHS Investments, LLC, a non-affiliate. The term is for eight months, with an original issuance discount of $9,000 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to the lower of $.09 or 55% of the lowest trading price of the Company
’
s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.
On December 16, 2016, the Company entered into a $63,250 12% Convertible Promissory Note with Auctus Fund, LLC, a non-affiliate. The term is for nine months, with an original issuance discount of $8,250 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to the lower of $.09 or 50% of the lowest trading price of the Company
’
s Common Stock during the 25 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.
On January 5, 2017, the Company entered into a $53,000 8% Convertible Promissory Note with Power Up Lending Group, LTD, a non-affiliate. The term of the Note is for 9 months, with an original issuance discount of $3,000 for due diligence and legal costs. The Note is convertible after 180days into Common Stock of the Company at a conversion price which shall be equal to 55% of the average of the three lowest trading prices of the Company
’
s Common Stock during the 10 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability. Power Up Lending Group, LTD has declared the Company in default of its obligations under the Note.
On March 7, 2017, the Company entered into a $25,000 12% Convertible Promissory Note with Vista Capital Investments, LLC, a non-affiliate. The term of the Note is for two years, with an original issuance discount of $5,000 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 50% of the lowest trading price of the Company
’
s Common Stock during the 25 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.
On March 7, 2017, the Company entered into a $5,000,000 equity line with Tangier Investment Group, LLC which will require a registration statement to be filed. The Company no longer intends to move forward on the equity line. As part of the Equity line the Company entered into a commitment note for $29,000 with no interest. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price, which shall be equal to 50% of the lowest trading price of the Company
’
s Common Stock during the 25 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.
On March 13, 2017 the Company entered into a $43,000 8% Convertible Promissory Note with PowerUp Lending Group, LTD, a non-affiliate. The term of the Note is for 9 months, with an original issuance discount of $3,000 for due diligence and legal costs. The Note is convertible after 180 days into Common Stock of the Company at a conversion price which shall be equal to 55% of the average of the three lowest trading prices of the Company
’
s Common Stock during the 10 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability. Power Up Lending Group, LTD has declared the Company in default of its obligations under the Note.
On January 17, 2017 Vista Capital Investments, LLC converted $10,000 of its $60,500 note dated March 23, 2016 at a conversion price of $0.01925 for 519,481 shares.
On January 24, 2017 Tangiers Investment Group, LLC converted $19,943 of its $121,000 note dated February 4, 2016 at a conversion price of $0.0175 for 1,139,600 shares.
On January 30, 2017 Vista Capital converted $14,500 of its $60,500 note dated March 23, 2016 at a conversion price of $0.01375 for 1,054,545 shares.
On February 22, 2017 Tangiers Investment Group, LLC converted $10,119 of its $121,000 note dated February 4, 2016 at a conversion price of $0 61 for 1,658,852 shares.
On March 17, 2017 Collier Investments, LLC converted $7,995 of its $75,000 note it acquired from Tangiers Investment Group, LLC dated February 4, 2016 at a conversion price of $0 410 for 1,950,000 shares.
On March 3, 2017 Vista Capital Investments, LLC converted $5,637.50 of its $60,500 note dated March 23, 2016 at a conversion price of $0 451 for 1,250,000 shares.
On March 9, 2017 GHS Investments, LLC converted $4,100 of its $66,500 note it acquired from Tangiers Investment Group, LLC dated March 24, 2016 at a conversion price of $0 41 for 1,000,000 shares.
29
On March 17, 2017 Collier Investments, LLC converted $7,995 of its $75,000 note it acquired from Tangiers Investment Group, LLC dated February 4, 2016 at a conversion price of $0 410 for 1,950,000 shares.
On April 7, 2017 GHS Investments, LLC. converted $3,300 of its note originally owned by Tangiers Investment Group, LLC dated March 24, 2016 at a conversion price of $0 33 for 1,000,000 common shares. On May 2, 2017 the Company entered into a Securities Purchase Agreement with GPL Ventures LLC the agreement allows the Company to draw down up to $10,000,000 over the term of the agreement with a maximum drawdown of $125,000 at one time.
On May 16, 2017 the Company entered into a $200,000 8% Convertible Promissory Note with Tri-Bridge Ventures LLC, a non-affiliate. The term of the Note is for 9 months. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which, shall be equal to 50% of the lowest trading price of the Company
’
s Common Stock during the 20 trading days prior to the election to convert. Tri-Bridge Ventures, LLC will fund $100,000 of the $200,000 Convertible Promissory Note Upon the filing of the Company
’
s 2016 year-end audited financial statements on Form 10K and the 2017 first quarter results on Form 10Q. Tri-Bridge Ventures, LLC will have the right to fund the remaining balance at any time during the term of the Note. This transaction never closed, and the agreement was terminated
On May 16, 2017, the Company entered into a $10,000,000 equity line with GPL Ventures, LLC, which will require a registration statement to be filed. As part of the Equity line the Company entered into a commitment note for $100,000. The term of the Note is for 6 months. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price, which shall be equal to 80% of the lowest trading price of the Company
’
s Common Stock during the 20 trading days prior to the election to convert. The company no longer plans on moving forward with GPL Ventures, LLC on the equity line.
On May 24, 2017 the Company entered into a $10,000 12% Convertible Promissory Note with PowerUp Lending Group, LTD, a non-affiliate. The term of the Note is for 9 months, with an original issuance discount of $3,000 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 58% of the average of the three lowest trading prices of the Company
’
s Common Stock during the 10 trading days prior to the election to convert. Power Up Lending Group, LTD has declared the Company in default of its obligations under the Note.
On July 6, 2017 Power Up Lending Group LTD. converted $1,070 of its $53,000 note dated January 5, 2017 at a conversion price of $0 092 for 1,163,043 common shares.
On July 21, 2017 Power Up Lending Group LTD. converted $795 of its $53,000 note dated January 5, 2017 at a conversion price of $0 068 for 1,169,118 common shares.
On July 27, 2017 Power Up Lending Group LTD. converted $890 of its $53,000 note dated January 5, 2017 at a conversion price of $0 064 for 1,390,625 common shares.
On August 2, 2017 Power Up Lending Group LTD. converted $770 of its $53,000 note dated January 5, 2017 at a conversion price of $0 055 for 1,400,000 common shares.
On August 9, 2017 Power Up Lending Group LTD. converted $770 of its $53,000 note dated January 5, 2017 at a conversion price of $0 055 for 1,400,000 common shares.
In September 2017, the Company entered two Promissory Notes for $5,000 each with an unrelated private party. The Notes bear interest at the rate of 4% per annum and are due on January 30, 2018. These notes are currently in default.
In October the Company entered into a Promissory Note for $29,500 with an unrelated private Party. The Note bears interest at the rate of 4% per annum and has a due date of April 30, 2018. These notes are currently in default.
In December 2017 the Company entered into a Promissory Note for $9,000 with an unrelated private Party. The note bears interest at the rate of 4% per annum and has a due date of April 30, 2018. These notes are currently in default.
NOTE 4
- DERIVATIVE LIABILITY
The Company issued financial instruments in the form of convertible notes with embedded conversion features. The convertible notes payable have conversion rates which are indexed to the market value of the Company
’
s common stock price.
Price protection clauses of the conversion features of the 2017 convertible notes (see Note 3) triggered derivative accounting under GAAP.
During the year ending December 31, 2017, the company issued four convertible promissory notes totaling $169,000.
|
|
Derivative Liability
|
|
Balance as of December 31, 2016
|
$
467,491
|
Change in derivative liability
|
325,407
|
Balance December 31, 2017
|
$
792,898
|
NOTE 5 - COMMON STOCK AND COMMON STOCK WARRANTS
Common Stock
On August 4, 2016 the company issued 6,218,000 at $.13 for consulting services.
On August 4, 2016, $15,000 of the note dated February 4, 2016 was converted at $.05 for 333,333 shares of common stock. In addition, 100,000 were issued to the holder of this note for a financing fee on this note.
On October 3, 2016, 750,000 shares of common stock held by Dignitas Consulting, LLC. was cancelled due to lack of performance under a contract entered into June of 2016.
On October 20, 2016, Vista Capital Investments, LLC converted $7,500 of its $60,500 note dated March 23, 2016 at a conversion price of $0.0385 for 194,805 shares.
On December 6, 2016, GHS Investments, LLC converted $33,000 of its $66,500 note it acquired from Tangiers dated March 24, 2016 at a conversion price of $0.033 for 1,100,000 shares.
On December 14, 2016, Tangiers Investment Group, LLC converted $15,000 of its $121,000 note dated February 4, 2016 at a conversion price of $0.0325 for 461,538 shares.
On January 17, 2017 Vista Capital Investments, LLC converted $10,000 of its $60,500 note dated March 23, 2016 at a conversion price of $0.01925 for 519,481 shares.
On January 24, 2017 Tangiers Investment Group, LLC converted $19,943 of its $121,000 note dated February 4, 2016 at a conversion price of $0.0175 for 1,139,600 shares.
On January 30, 2017 Vista Capital converted $14,500 of its $60,500 note dated March 23, 2016 at a conversion price of $0.01375 for 1,054,545 shares.
On February 22, 2017 Tangiers Investment Group, LLC converted $10,119 of its $121,000 note dated February 4, 2016 at a conversion price of $0.0061 for 1,658,852 shares.
On March 3, 2017 Vista Capital Investments, LLC converted $5,637.50 of its $60,500 note dated March 23, 2016 at a conversion price of $0.00451 for 1,250,000 shares.
On March 9, 2017 GHS Investments, LLC converted $4,100 of its $66,500 note it acquired from Tangiers Investment Group, LLC dated March 24, 2016 at a conversion price of $0.0041 for 1,000,000 shares.
On March 17, 2017 Collier Investments, LLC converted $7,995 of its $75,000 note it acquired from Tangiers Investment Group, LLC dated February 4, 2016 at a conversion price of $0.00410 for 1,950,000 shares.
On April 7, 2017 GHS Investments, LLC. converted $3,300 of its note originally owned by Tangiers Investment Group, LLC dated March 24, 2016 at a conversion price of $0.0033 for 1,000,000 common shares.
On July 6, 2017 Power Up Lending Group LTD. converted $1,070 of its $53,000 note dated January 5, 2017 at a conversion price of
$0.00092 for 1,163,043 common shares.
On July 21, 2017 Power Up Lending Group LTD. converted $795 of its $53,000 note dated January 5, 2017 at a conversion price of
$0.00068 for 1,169,118 common shares.
On August 9, 2017 Power Up Lending Group LTD. converted $765 of its $53,000 note dated January 5, 2017 at a conversion price of
$0.00055 for 1,390,625 common shares.
On August 2, 2017 Power Up Lending Group LTD. converted $770 of its $53,000 note dated January 5, 2017 at a conversion price of $0.00055 for 1,400,000 common shares.
31
On August 9, 2017 Power Up Lending Group LTD. converted $770 of its $53,000 note dated January 5, 2017 at a conversion price of $0.00055 for 1,400,000 common shares.
NOTE 6 PREFERRED STOCK
The Company has authorized a total of 20,000,000 Shares of Preferred Stock, $ .0001 par value, which may be issued from time to time and bearing such rights, privileges and preferences as shall be designated by the Board of Directors. As of December 31, 2015, the Company had issued 4,000 Shares of Preferred Stock, designated as
“
Cumulative Preference
‘
A
’
”
, at a price of $1.25 per Share. The Shares bear an annual coupon of 5%, and are convertible into Shares of Common Stock of the Company at any time commencing one (1) year from the date of issuance at a conversion price of $1.25 per Share
During the year ended December 31, 2014, we sold $5,000 principal amount of Series
“
A
”
5% Cumulative Convertible Preferred Stock, at a price of $1.25 per Share. These Shares bear annual cumulative dividends of 5%, payable at the option of the Company in cash or Shares of Common Stock. At the option of the holder, beginning one year from the date of issuance the Shares are convertible into Shares of Common Stock at a price of $1.25 per Share.
In April, 2015, the Corporation authorized the issuance of up to 10,000,000 shares of Preferred Stock to be designated
“
Series B Preferred Stock
”
, having a conversion right at the option of the holder beginning one year from the date of issuance, and which shall be convertible into Shares of Common stock at a Conversion Price equal to the closing market Bid price of the Corporation
’
s Common Stock on the trading date immediately preceding the date of conversion, in accordance with the Certificate of Designation attached hereto and made a part hereof. In addition, the holder of each Share of Series B Stock shall have the equivalent voting rights of two (2) Shares of Common Stock. The Preferred B shares certificate of Designation was changed as described below.
In August of 2016 the company changed the Certificate of Designation for the Preferred B shares giving the holder 1,000 common votes for every preferred B share held with a conversion right of 100 common shares for every preferred B share held. Preferred B shares were issued in the second quarter 2017, following the effectiveness of the Information Statement as filed by the Company on Form 14C. This change gave approximately 99% voting control to the three Board of Directors (if they vote together).
On August 4, 2016 the company issued 660,000 shares of preferred series B shares to RP Capital. Each preferred series B is convertible into 100 shares of the company
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s common stock, for research and development services.
In February 2017 the Company
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s CEO, James Farinella, assigned his rights to the Voluptas provisional patents that he owns and all intellectual property rights to Voluptas for 2,350,000 preferred B shares of the Company. On May 10, 2017 the provisional patent was updated and refilled increasing the protection covering more than 10 delivery methods. In February 2017 the Company
’
s Chief Executive Officer, James M. Farinella, was issued 660,000 Preferred B shares. The Company agreed to issue these shares to Mr. Farinella in 2016 for him joining the Company as an Officer and Director. Mr. Farinella surrendered 120,000 Preferred B shares to pay of loans owed to three trust accounts and those trust accounts were issued 40,000 preferred C shares each. At the end of December 31, 2017 Mr. Farinella
owned 2,601,000 Shares of Preferred B shares.
In February 2017 the Company
’
s CEO, James Farinella, assigned his rights to the Voluptas provisional patents that he owns and all intellectual property rights to Voluptas for 2,350,000 preferred B shares of the Company. On May 10, 2017 the provisional patent was updated and refilled increasing the protection covering more than 10 delivery methods. In February 2017 the Company
’
s Chief Executive Officer, James M. Farinella, was issued 660,000 Preferred B shares. The Company agreed to issue these shares to Mr. Farinella in 2016 for him joining the Company as an Officer and Director. Mr. Farinella surrendered 120,000 Preferred B shares to pay of loans owed to three trust accounts and those trust accounts were issued 40,000 preferred C shares each. James Farinella now owns 2,890,000 Preferred B shares.
In February 2017 the Company
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s Chief Operating Officer, Gina Morreale, was issued 240,000 Preferred B shares. The Company agreed to issue these shares to Miss Morreale in 2016 for her joining the Company as an Officer and Director.
Subsequently, Gina Morreale resigned as an officer and director of the Company and relinquished the 240,000 preferred B shares.
There were 3,550,000 Preferred B shares issued and outstanding as of December 31, 2017. Of the Preferred B shares that were issued during the year ended 2017, 3,381,000 were issued to several former members of the Board of Directors.
In August of 2016 the Company also created a Certificate of Designation for a preferred C class as an investment class of stock that carries no voting rights and converts into 100 shares of common for every preferred C share owned. Additionally, these shares only allow the holder to convert into common and own no more than 9.9% of the outstanding at any point in time. There are 160,000 Preferred C shares issued and outstanding as of December 31, 2017.
NOTE 7 - GOING CONCERN
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The Company's financial statements are prepared using Generally Accepted Accounting Principles applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has recently accumulated significant losses and has negative working capital. All of these items raise substantial doubt about its ability to continue as a going concern. Management's plans with respect to alleviating the adverse financial conditions that caused management to express substantial doubt about the Company's ability to continue as a going concern are as follows:
We have incurred net losses of $14,460,391 since inception through December 31, 2017. The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2017 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our loss from operations and working capital deficit. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to generate revenues or report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.
The Company is currently trying to raise new debt or equity to for acquisitions regarding setting up a facility for the manufacturing nutraceutical Tea
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s and Herb
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s infused with CBD oils and powders If the Company is not successful in the development and implementation of a concept which produces positive cash flows from operations, the Company may be forced to continue to raise additional equity or debt financing to fund its ongoing obligations or risk ceasing doing business.
There can be no assurance that the Company will be able to achieve its business plans, raise any more required capital or secure the financing necessary to achieve its current operating plan. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations.
NOTE 8
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COMMITMENTS AND CONTINGENCIES
On September 1, 2015, the Company received notice of an Administrative Complaint filed by the State of Florida Office of Financial Regulation (OFR) concerning certain private placement investments received by the Company during the period from 2011 to 2013 and the applicability of the registration exemption provisions of the Florida Statutes to said investments. The Company vigorously disputes the legal basis for this Administrative Complaint as it relates to the Company. Written submissions were presented to the OFR and the OFR designated hearing offer has rendered a recommendation that the Company should be fined in the amount of $980,000. The Company had reached a settlement with the OFR in the amount of $25,000. The Company was unable to pay the settlement amount and on July 3, 2017 an Order was entered against the Company, and in favor of the ORF, in the full amount sought of $980,000. As of the date of this Report, no Judgment has been entered. When the company has the resources available it will contact the OFR to try to resurrect the prior settlement.
On June 27, 2017 an assignor to the Company
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s former auditors (Friedman LLP) filed Suit against the Company in Superior Court of the State of New Jersey, Camden County, for $13,390 in alleged open invoices. Despite not being properly served the Plaintiff moved for, and received, a default Judgment in the full amount sought. It is the intention of the Company to move to vacate the Judgment for lack of proper service and based on the Company
’
s meritorious defenses that: (i) Friedman failed to provide the audit services for which it billed; and more than $5,000 of the amount sought related to services related to another entity.
On November 21, 2017 Power Up Lending Group, LTD. filed a Complaint in the United States District Court for the Eastern District of New York alleging the Company has defaulted on three convertible promissory notes in the aggregate amount of $155,000. It is the Company
’
s position that it has not yet been properly served with the Summons and Complaint. As of the date of this report, not default or Judgment has been entered. The Company hopes to be able to reach a settlement with Power Up when the Company
’
s financial condition permits.
NOTE 9 - SUBSEQUENT EVENTS
On January 5, 2018 Power Up Lending Group LTD. converted $855 of its $53,000 note dated January 5, 2017 at a conversion price of $0 061 for 1,401,639 common shares.
On January 22, 2018 GHS Investments, LLC. converted $717 of its note originally owned by Tangiers Investment Group, LLC dated March 24, 2016 at a conversion price of $0 044 for 1,630,000 common shares.
On March 6, 2018 Power Up Lending Group LTD. converted $1,790 of its $53,000 note dated January 5, 2017 at a conversion price of $0 11 for 1,627,273 common shares.
On or about April 26, 2018, the Company sold 173,400 shares of Series B Preferred Stock for the amount of $15,000.
On May 28,2018, Fernando Lopez resigned as the Chief Operating Officer and Director, of MJ Biotech, Inc. Mr. Lopez' resignation was
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due to personal reasons and did not reflect any concerns and/or disagreements relating to MJ Biotech, Inc., its operations, policies or practices. Simultaneous with is resignation, Mr. Lopez returned all company stock issued to him during the tenure of his association with MJ Biotech, Inc.