Notes to the Condensed Consolidated Financial
Statements
June 30, 2018 (Unaudited)
NOTE l: NATURE OF ORGANIZATION
Mining Power Group, Inc. formerly
known as Rich Cigars, Inc. (the "Company") was a Florida Corporation incorporated on July 29, 2013, and was established
to manufacture and distribute high-quality, hand rolled, premium cigars under the Rich Cigars brand name. The Company had branded
custom cigars to be sold via the internet and through retail locations. The Company's primary operations are currently in the Miami,
Florida area, and management intends to conduct our business principally in the U.S. through our own sales and marketing team.
In November 2017, the Company underwent
a change in control and became a Colorado corporation. As a result of this change, the Company changed the business name to Intercontinental
Technology, Inc. in order to reflect a change in the Company's direction and overall strategy. The Company's new strategic direction
will be to focus on the acquisition, development, and marketing of proprietary patented products that are readily marketable internationally,
and at the same time, its entering the business of cryptocurrency mining by the ownership of multiple cryptocurrency mining machines.
On December 26, 2017, the Company
completed a reorganization. Rich Cigars, Inc., having been renamed to RCGR SUB, Inc., became a direct, wholly-owned subsidiary
of a newly formed Delaware corporation, First Intercontinental Technology, Inc. First Intercontinental Technology, Inc. was then
considered the parent and is now the public entity. Additionally, another Delaware corporate was formed, Intercontinental Services,
Inc. As of the effective time of the merger, all outstanding shares of common stock and preferred stock of Rich Cigars, Inc. were
automatically converted into identical shares of common stock or preferred stock in the parent on a one-for-one basis.
On February 16, 2018, the Company's
Board of Directors voted to annul and vitiate the series of transactions in Delaware by filing certificates of correction with
Delaware's Secretary of State. On February 21, 2018, the Company amended and restated the Articles of incorporation in order to
change the Company's name to Mining Power Group, Inc.
NOTE 2: MARCH 2018 Q1 10Q RESTATEMENT
On February 16, 2018, the
Company issued 2,000,000 shares of common stock valued at the conversion price of $0.01963. The shares were issued in
exchange for $39,250 for a certain Convertible Promissory Note, dated March 27, 2017 between Rich Cigars, Inc and Crown
Bridge Partners, LLC which sold the note to D&D Capital, Inc, who submitted the Conversion Notice. On April
16, 2018, D&D Capital, Inc. cancelled the share issuance and returned the 2,000,000 shares. As a result of the
cancellation, the Company will file an amendment of its 10-Q filed for the period ended March 31, 2018 to reflect the
cancellation.
NOTE 3: GOING CONCERN
These condensed consolidated financial
statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business for the foreseeable future. As of June 30, 2018, the Company has incurred an accumulated deficit
of $ 1,426,611 since inception. This raises substantial doubt about the Company's ability to continue as a going concern.
Management's plans include raising
capital through the equity markets to fund operations and eventually generating of revenue through its business; however, there
can be no assurance that the Company will be successful in such activities. These consolidated financial statements do not include
any adjustments relating to the recovery of the recorded assets or the classifications of the liabilities that might be necessary
should the Company be unable to continue as a going concern.
NOTE 4: DISCONTINUED OPERATIONS
On November 27, 2017, the Company
entered into a Subscription Agreement for the purchase of 1,000,000 shares of restricted Series A Convertible Preferred Supermajority
voting stock Pursuant to this agreement, the Company announced a shift in the strategic focus.
As a result of this shift, the Company
has recognized a cessation of it business operations for Rich Cigars in accordance with Accounting Standards Codification (ASC)
205-20, Discontinued Operations. As such, the historical results of the Company have been classified as discontinued operations.
As of the year ended December 31, 2017, assets of discontinued operations consisted of property and equipment of $498. As of the
period ended June 30, 2018 all property and equipment was written-off.
Results of the discontinued operations
for the six months ended June 30, 2018 and 2017 are as follows:
|
|
Three Months Ended
June 30 2018
|
|
Three Months Ended
June 30 2017
|
|
Six Months Ended
June 30 2018
|
|
Six Months Ended
June 30 2017
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
—
|
|
|
$
|
2,109
|
|
|
$
|
—
|
|
|
$
|
4,606
|
|
COST OF SALES
|
|
|
—
|
|
|
|
731
|
|
|
|
—
|
|
|
|
2,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
—
|
|
|
|
1,378
|
|
|
|
—
|
|
|
|
2,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting and Audit
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,704
|
|
Amortization Expense
|
|
|
—
|
|
|
|
425
|
|
|
|
—
|
|
|
|
850
|
|
Depreciation Expenses
|
|
|
—
|
|
|
|
107
|
|
|
|
—
|
|
|
|
214
|
|
Legal Fees
|
|
|
—
|
|
|
|
3,390
|
|
|
|
—
|
|
|
|
23,670
|
|
Marketing Expense
|
|
|
—
|
|
|
|
30,333
|
|
|
|
|
|
|
|
32,095
|
|
Meal and Entertainment
|
|
|
—
|
|
|
|
5,751
|
|
|
|
—
|
|
|
|
10,544
|
|
Officers Compensation
|
|
|
—
|
|
|
|
48,183
|
|
|
|
—
|
|
|
|
73,648
|
|
Other General and Administrative
|
|
|
—
|
|
|
|
20,347
|
|
|
|
—
|
|
|
|
25,249
|
|
Professional Fees
|
|
|
—
|
|
|
|
19,051
|
|
|
|
—
|
|
|
|
47,963
|
|
Transfer Agent Fees
|
|
|
—
|
|
|
|
1,381
|
|
|
|
—
|
|
|
|
3,051
|
|
Travel Expense
|
|
|
—
|
|
|
|
26,473
|
|
|
|
—
|
|
|
|
45,836
|
|
Total operating income (expenses)
|
|
|
—
|
|
|
|
155,441
|
|
|
|
—
|
|
|
|
269,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
$
|
—
|
|
|
$
|
(154,063
|
)
|
|
$
|
—
|
|
|
$
|
(267,600
|
)
|
Cash from discontinued operations
for the six months ended June 30, 2018 and 2017 are as follows:
|
|
Six Months Ended
June 30 2018
|
|
Six Months Ended
June 30 2017
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net Income (loss) from operations
|
|
$
|
—
|
|
|
$
|
(267,600
|
)
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
—
|
|
|
|
1,064
|
|
Stock issued for services
|
|
|
—
|
|
|
|
10,000
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
—
|
|
|
|
—
|
|
Prepaid expenses
|
|
|
—
|
|
|
|
(17,152
|
)
|
Inventory
|
|
|
—
|
|
|
|
13,179
|
|
Accounts payable and accrued expenses
|
|
|
—
|
|
|
|
19,586
|
|
Net cash used in operating activities
|
|
$
|
—
|
|
|
$
|
(240,923
|
)
|
NOTE 5: SUMMARY OF SIGNIFICANT
ACCOUNT POLICIES
Principles of Consolidation
The accompanying consolidated financial
statements of Mining Power Group, Inc. (formerly Rich Cigars, Inc.) includes its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Accounting policies refer to specific
accounting principles and the methods of applying those principles to fairly present the company's financial position and results
of operations in accordance with generally accepted accounting principles. The policies discussed below include those that management
has determined to be the most appropriate in preparing the company's financial statements and are not discussed in a separate footnote.
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. This change in classification does not materially affect previously reported cash flows from operations or from
financing activities in the Statement of Cash Flows and had no effect on the previously reported Statement of Operations for any
period.
Basis of Presentation
The accompanying financial statements
have been prepared by the Company in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United
States of America. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at June 30, 2018 and 2017 and for the periods then
ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance
with U.S. generally accepted accounting principles have been condensed or omitted. The Company suggests these condensed financial
statements be read in conjunction with the December 31, 2017 audited financial statements and notes thereto included in the Company’s
Form 10-K. The results of operations for the period ended June 30, 2018 are not necessarily indicative of the operating results
for the full year.
Use of Estimates
The preparation of consolidated
financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions
that affect amounts reported in the consolidated financial statements,
Cash and Cash Equivalents
The Company considers all investments
with a maturity date of three months or less when purchased to be cash equivalents. The Company had cash in the amount of $453
and $0 as June 30, 2018 and December 31, 2017 respectively.
Beneficial Conversion Feature
If the conversion features of conventional
convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial
conversion feature ("BCF"). A BCF is recorded by the Company as a debt discount pursuant to Financial Accounting Standards
Board ("FASB") Accounting Standards Codification ("ASC") Topic 470-20
Debt with Conversion and Other Options.
In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes
the discount to interest expense over the life of the debt using the effective interest method.
Embedded Conversion Features
The Company evaluates embedded conversion
features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion
feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value
recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated
under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion features.
Derivative Financial Instruments
Fair value accounting requires bifurcation
of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their
fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing
model in assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional
convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered
conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities
are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded
in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative
instruments such as warrants, are also valued using the Black Scholes option-pricing model.
Revenue Recognition
The Company recognizes revenue on
arrangements in accordance with ASC 606
Revenue Recognition.
Income Taxes
Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Additionally, the recognition of future tax benefits, such as net
operating loss carryforwards, is required to the extent that realization of such benefits is more likely than not. Deferred tax
assets and liabilities are determined using enacted tax rates expected to apply to taxable income in the years in which the assets
and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income tax expense in the period that includes the enactment date.
In the event the future tax consequences
of differences between the financial reporting bases and the tax bases of the Company's assets and liabilities result in deferred
tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required.
A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some or all of
the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets, management considers the
scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies.
The Company files income tax returns
in the United States and Florida, which are subject to examination by the tax authorities in these jurisdictions. Generally, the
statute of limitations related to the Company's federal and state income tax return is three years. The state impact of any federal
changes for prior years remains subject to examination for a period up to five years after formal notification to the states.
Management has evaluated tax positions
in accordance with ASC 740,
Income Taxes,
and has not identified any significant tax positions, other than those disclosed.
All of the Company's tax years since inception remain subject to examination by Federal and State jurisdictions.
Earnings Per Share
Basic net income per common share (“
Basic EPS
”)
excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the
period. Diluted net income per common share (“
Diluted EPS
”) reflects the potential dilution that could occur
if stock options or other contracts to issue shares of common stock were exercised or converted into common stock. The computation
of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net income per common
share.
The
following table presents the components of the computation of basic and diluted earnings per share for the periods indicated:
|
|
Three
Months Ended June 30
|
|
Six
Months Ended June 30
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) applicable to common shareholders
|
|
$
|
(263,637
|
)
|
|
$
|
(51,267
|
)
|
|
$
|
3,796,348
|
|
|
$
|
(349,477
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding, basic
|
|
|
42,787,728
|
|
|
|
2,712,980
|
|
|
|
33,852,073
|
|
|
|
2,688,865
|
|
Convertible
preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
963,000,000
|
|
|
|
—
|
|
Convertible
promissory notes
|
|
|
—
|
|
|
|
—
|
|
|
|
1,519,812
|
|
|
|
—
|
|
Weighted
average common shares outstanding, diluted
|
|
|
42,787,728
|
|
|
|
2,712,980
|
|
|
|
998,371,885
|
|
|
|
2,688,865
|
|
Net
Income per share - Basic
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.13
|
)
|
Net
income per shares - Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.13
|
)
|
NOTE 6: CONVERTIBLE NOTES PAYABLE
1 - On March 27, 2017, the Company entered
into a potentially dilutive convertible advance with Crown Bridge Partners LLC. The agreement provides that the Company may borrow
up to $675,000. Borrowings under the line bear interest at 8% upon maturity and include a 10% issue discount. The maturity date
for each tranche funded shall be 12 months from the effective date of each tranche. As of December 31, 2017, the Company has drawn
a $75,000 credit line against this facility. The advance, was payable on March 27, 2018. The note was issued at a 10% discount.
The net proceeds received after issuance costs and fees was $63,750. In accordance with ASC 835-30-45, Interest, the Company records
the fees, costs, and original issue discount as reduction of the carrying amount of the debt and amortizes the balances over the
life of the debt instrument. Additionally, the note is convertible at the holder's discretion into shares of the Company's common
stock based on a conversion formula of 55% multiplied by the lowest price of the common shares for the 20 trading prior to which
the Notice of Conversion is received. If at any time the market price of the Company's common stock is trading below $0.50, then
an additional 10% discount shall be factored into the Conversion Price, resulting in a discount of 55%. In the event the Company
fails to maintain its status as "DTC Eligible" for any reason, or if the lowest trading prices of the common stock is
equal to or lower than $0.01, then an additional 5% discount shall be factored into the Conversion Price, resulting in a total
discount of 60%. The conversion formula created an embedded derivative conversion feature.
The Company valued this conversion feature
using the Black Scholes valuation model with the following assumptions: (i) as of June 30, 2018 dividend yield of zero, 365 days
term to maturity, risk free interest rate of 2.33% and annualized volatility of 34.82%, valued at $74,579 and (ii) as of December
31, 2017 dividend yield of zero, 365 day term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%,
valued at $1,679,176: The value of the conversion feature was assigned to the derivative liability and created a debt discount
to be amortized over the life of the convertible debt.
During the period ended December 31,
2017, the convertible option of the debt was exercised, resulting in 635,910 shares issued for $5,656 in principal and $2,000 in
accrued interest. Accrued interest related to this advance was $4,591 and $3,086 at June 30, 2018 and at December 31, 2017 respectively,
and is included in accrued interest on the Balance Sheets.
Face Value balance as of June 30, 2018
is $29,344 and $69,344 as of December 31, 2017.
2 - On March 24, 2017, the Company entered
into a potentially dilutive convertible advance with Eagle Equities LLC. The advance, with a face value of $75,000, bears interest
at 8% per annum and is payable on March 24, 2018. The note was issued at a 10% discount. The net proceeds received after issuance
costs and fees was $63,750. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and original issue
discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument. Additionally,
the note is convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 55%
multiplied by the lowest price of the common shares for the 20 trading prior to which the Notice of Conversion is received. In
the event the Company experiences a DTC Chill on its shares, the Conversion Price shall be decreased to 45% instead of 55% while
that chill is in effect. If the Company fails to maintain the share reserve at the 4x discount of the note 60 days after the issuance
of the note, the conversion discount shall be increased by 10%. The conversion formula created an embedded derivative conversion
feature.
The Company valued this conversion feature
using the Black Scholes valuation model with the following assumptions: (i) as of June 30, 2018: dividend yield of zero, 365 days
term to maturity, risk free interest rate of 2.33% and annualized volatility of 34.82%, valued at $106,387 and (ii) as of December
31, 2017: dividend yield of zero, 83 days term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%,
valued at $ 1,188,270. The value of the conversion feature was assigned to the derivative liability and created a debt discount
to be amortized over the life of the convertible debt.
During the period ended December 31,
2017, the convertible option of the debt was exercised, resulting in 947,100 shares issued for $15,800 in principal and $756 in
accrued interest. Accrued interest related to this advance was $6,437 and $5,244 at June 30, 2018 and December 31, 2017, respectively,
and is included in accrued interest on the Balance Sheets. Face Value balance was $59,200 and $ 59,200 as of December 31, 2017
and June 30, 2018 respectively.
3 - On May 30, 2017, the Company entered
into a potentially dilutive convertible advance with Power Up Lending Group, LTD. The advance, with a face value of $38,000, bears
interest at 12% per annum and is payable on March 5, 2018. The note was issued at a 7% discount. The net proceeds received after
issuance costs and fees was $35,000. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and original
issue discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument.
Additionally, the note is convertible at the holder's discretion into shares of the Company's common stock based on a conversion
formula of 60% multiplied by the lowest price of the common shares for the 20 trading prior to which the Notice of Conversion is
received. The conversion formula created an embedded derivative conversion feature.
The Company valued this conversion feature
using the Black Scholes valuation model with the following assumptions: (i) as of June 30, 2018: dividend yield of zero, 35 day
term to maturity, risk free interest rate of 2.33% and annualized volatility of 16.62%, valued at $6,273, and (ii) as of December
31, 2017: dividend yield of zero, 150 day term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%,
valued at $553,851. The value of the conversion feature was assigned to the derivative liability and created a debt discount to
be amortized over the life of the convertible debt.
During the period ended December 31,
2017, the convertible option of the debt was exercised, resulting in 545,930 shares issued for $7,955 in principal. During the
period ended June 30, 2018 the convertible option of the debt was exercised, resulting in 310,902 shares issued for $48,578 in
principal and $2,280 in accrued interest.
Accrued interest related to this advance
was $2,686 and $2,387 at December 31, 2017 and June 30, 2018, respectively, and is included in accrued interest on the Balance
Sheets. Face Value balance was $30,045 and $0 as of December 31, 2017 and June 30, 2018 respectively.
4 - On May 15, 2017, the Company entered
into a potentially dilutive convertible advance with Kodiak Capital Group, LLC. The agreement provides that the Company may borrow
up to $337,500. Borrowings under the line bear interest at 8% per annum and include a 10% issue discount. On May 15, 2017, drew
against this debt facility. The net proceeds received after issuance costs and fees was $30,000. In accordance with ASC 835-30-45,
Interest, the Company records the fees, costs, and original issue discount as reduction of the carrying amount of the debt and
amortizes the balances over the life of the debt instrument. Additionally, the note is convertible at the holder's discretion into
shares of the Company's common stock based on a conversion formula of 55% multiplied by the lowest price of the common shares for
the 20 trading prior to which the Notice of Conversion is received. The conversion formula created an embedded derivative conversion
feature.
The Company valued this conversion feature
using the Black Scholes valuation model with the following assumptions: (i) as of June 30, 2018: dividend yield of zero, 55 day
term to maturity, risk free interest rate of 2.33% and annualized volatility of 16.62%, valued at $ 59,881, and (ii) as of December
31, 2017: dividend yield of zero, 135 day term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%.
valued at $680,625. The value of the conversion feature was assigned to the derivative liability and created a debt discount to
be amortized over the life of the convertible debt.
During the period ended December 31,
2017, the convertible option of the debt was exercised, resulting in 258,849 shares issued for $3,416 in principal. Accrued interest
related to this advance was $3,317 and $1,890 at June 30, 2018 and December 31, 2017 respectively, and is included in accrued interest
on the Balance Sheets. Face Value balance as of December 31, 2017 was $34,084 same as of June 30, 2018.
5 - On September 27, 2017, the Company
entered into a potentially dilutive convertible advance with Power Up Lending Group, LLC. The advance, with a face value of $28,000,
bears interest at 12% per annum and is payable on July 10, 2018. The note was issued at a 10% discount. The net proceeds received
after issuance costs and fees was $25,000. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and
original issue discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument.
Additionally, the note is convertible at the holder's discretion into shares of the Company's common stock based on a conversion
formula of 58% multiplied by the lowest price of the common shares for the 15 trading prior to which the Notice of Conversion is
received. The conversion formula created an embedded derivative conversion feature.
The Company valued this conversion
feature using the Black Scholes valuation model with the following assumptions: (i) as of June 30, 2018: dividend yield of zero,
88 day term to maturity, risk free interest rate of 2.33% and annualized volatility of 17.00%, valued at $44,537, and (ii) as of
December 31, 2017: dividend yield of zero, 192 day term to maturity, risk free interest rate of 1.76% and annualized volatility
of 63.54%, valued at $353,071. The value of the conversion feature was assigned to the derivative liability and created a debt
discount to be amortized over the life of the convertible debt.
During the period ended December
31, 2017, the convertible option of the debt was not exercised. During the period ended June 30, 2018, the convertible option
of the debt was exercised, resulting in 187,533 shares issued for $14,140 in principal. Accrued interest related to this advance
was $16,549 and $875 at June 30, 2018 and December 31, 2017, respectively, and is included in accrued interest on the Balance Sheets.
At June 30, 2018 and December 31, 2017, the convertible notes payable were recorded at $13,860 and $28,000, respectively.
NOTE 7: RELATED PARTY LOANS
: according to ASC
850, an entity and its principal owners and members of their immediate families are considered related parties.
Convertible Notes Payable
On February 21, 2018 Crown Bridge
Partners LLC, sold part of its potentially dilutive convertible advance to D&D Capital, Inc, a related party. Accrued interest
related to this advance was $1,855 and $0 at June 30, 2018 and December 31, 2017, respectively, and is included in accrued interest
on the Balance Sheets. Face value balance as of June 30, 2018 is $40,000. The Company valued this conversion feature using the
Black Scholes valuation model with the following assumptions: (i) as of June 30, 2018 dividend yield of zero, 230 days term to
maturity, risk free interest rate of 2.33% and annualized volatility of 4.22%, valued at $125,311. The value of the conversion
feature was assigned to the derivative liability and created a debt discount to be amortized over the life of the convertible debt.
Other Loans
The following loans bears no interest and due on demand:
1.
|
|
Consultant Capital Group, Inc
|
|
$
|
38,401
|
|
2.
|
|
D&D Capital, Inc
|
|
|
16,000
|
|
|
|
|
|
|
|
|
Total Related Party no interest due on demand Loans
|
|
|
|
$
|
54,401
|
|
NOTE 8: EQUITY
On November 27, 2017, the Company
issued 1,000,000 shares of Series A Convertible preferred stock for $125,000. The Preferred Stock is convertible in the Company's
common stock. Each share of the Company's Series A Convertible preferred stock is convertible into 1,000 shares of the Company's
common stock at a cost basis equivalent to par value per share, or $0.0001. Each share of the Series A Convertible preferred stock
votes at the equivalent of 20,000 shares of common stock.
On January 10, 2018 the
Company issued 37,000,000 common stock restricted shares, $0.0001 par value per share, converting 37,000 shares of the one
million (1,000,000) Series A Preferred Stock,
On February 28, 2018 the Company
issued 156,333 shares of common stock valued at the conversion price of $0.18. The shares were issued to convert $28,140 of the
principal amount of the Note dated as of May 30, 2017 having as beneficiary to Power Up Lending Group Ltd.
On March 6, 2018 the Company issued
109,569 shares of common stock valued at the conversion price of $0.1753. The shares were issued to convert $16,928 of the principal
amount and $2,280 of accrued and unpaid interest of the Note dated as of May 30, 2017 having as beneficiary to Power Up Lending
Group Ltd.
On April 25, 2018 the Company issued
45,000 shares of common stock value at the conversion price of $0.078. The shares were issued to convert $3,510 of the principal
amount of the Note dated as of May 30, 2017, having as beneficiary to Power Up Lending Group Ltd.
On April 25, 2018 the Company issued
187,533 shares of common stock value at the conversion price of $0.0754. The shares were issued to convert $14,140 of the principal
amount of the Note dated as of September 27, 2017, having as beneficiary to Power Up Lending Group Ltd.
On May 3, 2018 the Company issued 2,500,000 shares of common
stock at $0,0001 value having as beneficiary to Shelby White, which were subsequently cancelled in July 2018.
NOTE 9: COMMITMENTS AND CONTINGENCIES;
During the normal course of business,
the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the
case in accordance with ASC 450-20-50,
Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary accruals. As of June 30, 2018, the Company is not aware of any contingent
liabilities that should be reflected in the accompanying consolidated financial statements.
NOTE 10: SUBSEQUENT EVENTS AFTER
JUNE 30, 2018
The Company has evaluated subsequent
events that occurred through the date of the filing of the Company's second quarter 2018 Form 10-Q.
Asset Purchase and Rescission
On January 31, 2018, the Company
completed the purchase of the intellectual property assets of Simple Cork, Inc., a Florida corporation, and wholly-owned subsidiary
of Vapor Group, Inc. (the "Asset Purchase").
On July 10, 2018, the Company, Vapor
Group, Inc. and Simple Cork, Inc., the non-publicly-traded subsidiary company of Vapor Group, Inc. jointly announced that they
had reached a settlement and resolution pertaining to the Asset Purchase, dated January 31, 2018, Under the terms and conditions
of the settlement and resolution, the Asset Purchase Agreement in its entirety is rescinded ab initio. In its place, the Company
and Vapor Group shall issue a share dividend of common stock of Simple Cork, Inc., which is being spun-off pursuant to the provisions
of a Tier 2 Regulation A filing with the Securities and Exchange Commission not later than by Friday, September 14, 2018, which
date has been set as the ex-dividend date or the
issuance date for shareholders of record of either Company. The ratio of the quantity
of shares of Simple Cork, Inc. to be issued per shares held of either of the Company and Vapor Group, Inc. will be announced at
a later date.
In addition, each shareholder of
the Company and Vapor Group, Inc. shall receive rights to acquire additional shares of Simple Cork, Inc. as the spun-off company
at a 50% discount to the IPO price as set in the Reg A+ filing for new shareholders. The new Simple Cork, Inc. shareholders, not
shareholders of the Company or Vapor Group, Inc., shall not be entitled to such rights.
The result is that neither the Company
nor Vapor Group, Inc. will own the intellectual property assets of Simple Cork, Inc. Instead, Simple Cork, Inc., as a separate
public entity, will own such intellectual property rights and will in turn be owned, separately, by its own shareholders. Simple
Cork, Inc. shall separately assume responsibility for the development of “Simple Cork™”.
Share Issuances and Cancellations
On July 3, 2018 the Company cancelled
the 2,500,000 shares of common stock at $0.0001 value having as beneficiary to Shelby White, such issuance was made in error.
On July 6, 2018 the Company issued
10,000,000 common stock restricted shares, $0.0001 par value per share, converting 10,000 shares of the one million (1,000,000)
Series A Preferred Stock.
On July 6, 2018 the Company issued
1,715,961 shares of common stock value at the conversion price of $0.03897. The shares were issued to convert $59,200 of the principal
amount and $7,671 interest of the Note dated as of March 24, 2017, having as beneficiary to Eagle Equities LLC.
On August 3, 2018 the Company issued
2,298,212 shares of common stock value at the conversion price of $0.0413. The shares were issued to convert $95,008.08 of principal,
including penalty charge of the Note dated as of March 27, 2017, having as beneficiary to D&D Capital, Inc.
On August 6, 2018 the Company
issued 50,000 common stock restricted shares, $0.0001 par value per share, to each of three persons, 150,000 shares total,
for services rendered.
Change In Officers and Directors
On August 1, 2018, the Company appointed
Dror Svorai, a member of its Board of Directors. Following Mr. Svorai’s appointment and acceptance as a member of the Board
of Directors, the Board of Directors accepted the resignation of Yaniv Nahon as the President/Chief Executive Officer, Secretary,
Treasurer/Chief Financial Officer and a member of the Board of Directors. Immediately following the resignation of Mr. Nahon, the
Board of Directors appointed Dror Svorai, a member of the Board of Directors, as the Corporation’s President/Chief Executive
Officer, Secretary, Treasurer and Chief Financial Officer of the Company. Therefore, the sole member of the Board of Directors
is Dror Svorai. Mr. Nahon did not resign as a result of any disagreement with the Company on any matter relating to the Company’s
operations, policies or practices.
Acquisition of Northway Mining, LLC and
Pending Purchase Contract
On August 1, 2018, the Company entered
into an acquisition agreement (the “Acquisition Agreement”) to acquire the majority ownership interest of Northway
Mining, LLC (“Northway”). a New York limited liability company, located at 707 Flats Road, Athens, New York. Northway
is a cryptomining data center hosting third-party owned and operated cryptomining machines within its 5000 square feet facility.
It currently is hosting over 1,100 machines in its facilities at Flats Road under individual service agreements with third-party
machine owners.
Pursuant to the Acquisition Agreement
the Company acquired fifty-five percent (55%) of the ownership units of Northway in return for an investment of $1,100,000 (U.S.)
for the purposes of providing working capital and funds to Northway for improvements to, and expansion of, its facilities, and
the purchase of 30-acres of flat land and buildings at its Athens, New York address owned by a third party per that separate “Agreement
for Purchase of Property between Northway Mining, LLC and CSX4236 Motorcycle Salvage LLC” (the “Land Purchase Agreement”).
(The “Acquisition”) Under the terms and conditions of the Acquisition, Northway has amended and restated its New York
State limited liability company Operating Agreement under which it is stated that it will maintain its current management.
In addition, per the Acquisition Agreement,
the Company is providing the current Northway management with a performance-based stock option for two and a half million (2,500,000)
shares of the Company’s restricted common stock as earned over a period of six (6) months for the achievement of performance
goals as established by the Board of Directors of the Company.
Separately in connection with the Acquisition
Agreement, the Company assigned a purchase contract in total amount of $950,000 (“Purchase .Amount’) to Northway that
it has entered into pending the closing of the Acquisition for the purchase of a building located at 2 Flint Mine Road, Coxsackie,
NY 12051, SBL Nos. 71.00-1-20 and 71.00-1-3.112 (the “Purchase Contract”) which is to be used solely by Northway (the
“Agreement for Purchase of Property between Mining Power Group, Inc. and Northway Mining, LLC” or the “Building
Purchase Agreement”). Under the terms of Building Purchase Agreement, the Company shall pay on behalf of Northway, which
shall own the building, $350,000 at closing, with Northway paying the remainder of the Purchase Amount over time per the terms
of the Purchase Contract.