Notes to the Condensed Financial Statements
March 31, 2018 (Restated and Unaudited)
NOTE 1
:
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 has 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.
NOTE2: SUMMARY OF SIGNIFICANT
ACCOUNTING 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 March 31, 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 periods ended March
31, 2018 and 2017 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 $0 and
$0 as March 31, 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.
Advertising and Promotion
The Company expenses advertising
and promotion costs as incurred. The Company did not incur any advertising and promotion expenses during the quarter ended March
31, 2018 and 2017 respectively.
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. As of March 31, 2017, the convertible notes were convertible into 545,236 shares of common stock.
However, the notes were anti-dilutive.
The following table presents the
components of the computation of basic and diluted earnings per share for the periods indicated:
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
|
|
2018
|
|
2017
|
Numerator
|
|
|
|
|
|
Net income (loss) applicable to common shareholders
|
$3,989,500
|
|
($303,146)
|
Denominator
|
|
|
|
|
|
Weighted average common shares outstanding, basic
|
24,817,133
|
|
2,694,299
|
Convertible preferred stock
|
|
963,000,000
|
|
-
|
Convertible promissory notes
|
|
3,516,203
|
|
-
|
Weighted average common shares outstanding, diluted
|
991,333,336
|
|
2,694,299
|
Net income (loss) per share -Basic
|
|
$0.16
|
|
($0.11)
|
Net income (loss) per share -Diluted
|
$0.00
|
|
($0.11)
|
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 March 31, 2018, the Company has incurred net
losses of $1,233,459 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 March 31, 2018 all property and equipment was written-off.
Results of the discontinued operations
for the three months ended March 31, 2018 and 2017 are as follows:
|
|
Three Months Ended
March 31,
|
|
Three Months Ended
March 31,
|
|
|
2018
|
|
2017
|
|
|
|
|
|
REVENUES
|
|
$
|
—
|
|
|
$
|
2,497
|
|
COST OF SALES
|
|
|
—
|
|
|
|
1,651
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
|
|
|
|
846
|
|
|
|
|
|
|
|
|
|
|
OPERATION EXPENSES
|
|
|
|
|
|
|
|
|
Professional Fees
|
|
|
—
|
|
|
|
28,912
|
|
Officers Compensation
|
|
|
—
|
|
|
|
25,465
|
|
Legal Fees
|
|
|
—
|
|
|
|
20,280
|
|
Travel Expenses
|
|
|
—
|
|
|
|
19,363
|
|
Accounting and Audit
|
|
|
—
|
|
|
|
6,703
|
|
Other General and Administrative Expenses
|
|
|
—
|
|
|
|
4,901
|
|
Meal and Entertainment
|
|
|
—
|
|
|
|
4,793
|
|
Marketing Expense
|
|
|
—
|
|
|
|
1,762
|
|
Transfer Agent Fees
|
|
|
—
|
|
|
|
1,670
|
|
Amortization Expenses
|
|
|
—
|
|
|
|
425
|
|
Depreciation Expenses
|
|
|
—
|
|
|
|
107
|
|
Total operating income (expenses)
|
|
|
—
|
|
|
|
114,381
|
|
Income (loss) from operations
|
|
$
|
—
|
|
|
$
|
(113,535
|
)
|
|
|
Three Months Ended,
March 31, 2018
|
|
Three Months Ended
March 31, 2017
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net Income (loss) from operations
|
|
$
|
—
|
|
|
$
|
(113,535
|
)
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
—
|
|
|
|
532
|
|
|
|
|
|
|
|
|
|
|
Change in assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
—
|
|
|
|
(877
|
)
|
Prepaid expenses
|
|
|
—
|
|
|
|
(5,381
|
)
|
Inventory
|
|
|
—
|
|
|
|
871
|
|
Accounts payable and accrued expenses
|
|
|
—
|
|
|
|
9,489
|
|
Net cash used in operation activities
|
|
$
|
—
|
|
|
$
|
(108,901
|
)
|
NOTE 5: 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 as of March 31, 2018 at $43,176 and as of December 31, 2017 at $1,247,022 using the Black Scholes valuation model with
the following assumptions: dividend yield of zero, 86 day term to maturity, risk free interest rate of 1. 76% and annualized volatility
of 63.54%. 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 $4,000 and $3,086 at March 31, 2018 and at December 31, 2017
respectively, and is included in accrued interest on the Balance Sheets.
Face Value balance as of March 31,
2018 is $29,344 and $69,918 as of December 31, 2017. Interest expenses as of December 31, 2017 was $29,566 and $4,000 as pf March
31, 2018
On February 21, 2018 Crown Bridge
Partners LLC, sold $40,000 of its potentially dilutive convertible advance to a Company's related party D&D Capital, Inc.
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 as of December 31, 2017 at $1,188,270 and as of March 31, 2018 at $82,388 using the Black Scholes valuation model with
the following assumptions: dividend yield of zero, 83 day term to maturity, risk free interest rate of 1. 76% and annualized volatility
of 63.54%. 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 $645
in accrued interest. Accrued interest related to this advance was $5,244 and $3,608 at March 31, 2018 and December 31, 2017, respectively,
and is included in accrued interest on the Balance Sheets. Face Value balance was $61,050 and$ 59,200 as of December 31, 2017 and
March 31, 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 as of December 31, 2017 at $553,851 and as of
March 31, 2018 at $30,096 using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 150 day
term to maturity, risk free interest rate of 1. 76% and annualized volatility of 63.54%. 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. Accrued
interest related to this advance was $2,610 and $2.280 at December 31, 2017 and March 31, 2018, respectively, and is included in
accrued interest on the Balance Sheets. Face Value balance was $32,385 and $3,510 as of December 31, 201 7 and March 31, 2018 respectively.
During the period ended March 31,
2018 the convertible option of the debt was exercised, resulting in 265,902 shares issued for $45,068 in principal.
4 - 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 as of December 31, 2017 at $353,071 and as of March 31, 2018 at $34,492 using the Black Scholes valuation model with the
following assumptions: dividend yield of zero, 192 day term to maturity, risk free interest rate of 1. 76% and annualized volatility
of 63.54%. 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, At December 31, 2017 and 2016, the convertible note was recorded
at $963 and $0, respectively. Accrued interest related to this advance was $1,703 and $875 at March 31, 2018 and December 31, 2017
respectively, and is included in accrued interest on the Balance Sheets. At March 31 2018 and December 31, 2017, the convertible
notes payable were recorded at $28,000 and $30,040, respectively.
NOTE 6 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 $3 86 and $0 at March 31, 2018 and December 31, 2017 respectively, and is included in accrued interest
on the Balance Sheets. Face value balance as of March 31, 2018 is $40,000. The Company valued this conversion feature using the
Black Scholes valuation model with the following assumptions: (i) as of March 31, 2018 dividend yield of zero, 321 days term to
maturity, risk free interest rate of 2.09% and annualized volatility of 61.32%, valued at $27,334. 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 three months ended March
31, 2018, Kodiak Capital declared a default of the note payable to them invoking 22% retroactive interest and also put into effect
a penalty of $2,000 per day for non-delivery of conversion for the shares according to the note agreement, which led to increasing
the balance of the note to $142,633 (including $2,630 accrued interest on the Kodiak note) at March 31, 2018. On February 15, 2018,
S&E Capital, LLC, a related party to Mining Power Group Inc., reached an agreement with Kodiak Capital to purchase the note.
The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of March
31, 2018 dividend yield of zero, 365 days term to maturity, risk free interest rate of 1.99% and annualized volatility of 36.38%,
valued at $155,553. 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
During the three months ended March
31, 2018, Mining Power borrowed $38,401 from Consultant Capital Group Inc. in a form of related party loan that bears no interest
and due on demand.
NOTE 7 RESTATEMENT
On February 15, 2018 Kodiak Capital
Group LLC, sold all of its potentially dilutive convertible advance to S&E Capital, Inc, a related party, including penalties
and default interest of $108,549 was recorded and added to the balance sheet. As a result of this transaction the Company is filing
this amendment of its 10-Q filed for the period ended March 31, 2018 to reflect this transaction. The note was deemed in default
and a penalty of $120,000 was recorded and added to the balance.
The following financials shows the
original filing, this restated filing and the differences between both:
Balance Sheet
|
|
March 31, 2018
(Unaudited, Restated and Filed)
|
|
March 31, 2018
(Adjustments)
|
|
March 31, 2018
(Unaudited and Restated)
|
|
|
|
|
|
Total current assets
|
|
$
|
4,500
|
|
|
|
|
|
|
$
|
4,500
|
|
Total current liabilities
|
|
$
|
391,460
|
|
|
$
|
70,485
|
|
|
$
|
461,945
|
|
Series A Convertible Preferred Stock
|
|
$
|
121,300
|
|
|
|
|
|
|
$
|
121,300
|
|
Total shareholders' equity (deficit)
|
|
$
|
(508,260
|
)
|
|
$
|
(70,485
|
)
|
|
$
|
(578,745
|
)
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
March 31, 2018
(Unaudited, Restated and Filed)
|
|
March 31, 2018
(Adjustments)
|
|
March 31, 2018
(Unaudited and Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expense
|
|
$
|
(38,301
|
)
|
|
|
|
|
|
$
|
(38,301
|
)
|
Total other income (expense)
|
|
$
|
4,098,286
|
|
|
$
|
(70,485
|
)
|
|
$
|
4,027,801
|
|
Income (Loss) from continuing operations
|
|
$
|
4,059,985
|
|
|
$
|
(70,485
|
)
|
|
$
|
3,989,500
|
|
Income (Loss) from discontinued operations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
NET INCOME(LOSS)
|
|
$
|
4,059,985
|
|
|
$
|
(70,485
|
)
|
|
$
|
3,989,500
|
|
Net income (loss) per share applicable to common stockholders - basic (continuing operations)
|
|
$
|
0.16
|
|
|
$
|
—
|
|
|
$
|
0.16
|
|
Net income (loss) per share applicable to common stockholders - basic (discontinued operations)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net income (loss) per share applicable to common stockholders - diluted (continuing operations)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net income (loss) per share applicable to common stockholders - diluted (discontinued operations)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Weighted average number of common shares outstanding - basic
|
|
|
24,817,133
|
|
|
|
|
|
|
|
24,817,133
|
|
Weighted average number of common shares outstanding - diluted
|
|
|
989,626,079
|
|
|
|
1.707.257
|
|
|
|
991,333,336
|
|
Statements of Cash Flow
|
|
For the three months ended
|
|
|
March 31, 2018 (Unaudited, Restated and Filed)
|
|
March 31, 2018 (Adjustments)
|
|
March 31, 2018 (Unaudited and Restated)
|
|
|
|
|
|
Net cash used in operating activities continuing operations
|
|
$
|
(38,301
|
)
|
|
|
|
|
|
$
|
(38,301
|
)
|
Net cash provided by financing activities
|
|
$
|
38,301
|
|
|
|
|
|
|
$
|
38,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
CASH, beginning of period
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
CASH, end of period
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 8: PROPERTY AND EQUIPMENT
Property and Equipment consists
of the following:
|
|
March 31, 2018
|
|
December 31, 2017
|
Furniture and Equipment
|
|
$
|
—
|
|
|
$
|
2,131
|
|
Less: Accumulated Depreciation
|
|
$
|
—
|
|
|
$
|
(1,633
|
)
|
Property and Equipment, net
|
|
$
|
—
|
|
|
$
|
498
|
|
The Company recorded Depreciation Expense $0
and $423 for the period ended years ended March 31, 2018 and December 31, 2017. As of March 31, 2018 all Property and Equipment
was written-off.
NOTE 9: 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.
NOTE 10: 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 March 31, 2018, the Company is not aware of any contingent
liabilities that should be reflected in the accompanying consolidated financial statements.
NOTE 11: SUBSEQUENT EVENTS AFTER
MARCH 31, 2018
The Company has evaluated subsequent
events that occurred through the date of the filing of the Company's first 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 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 restricted common stock to a Shelby White. The issuance was cancelled by the Company on July 3, 2018, as the
issuance was 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 963,000 Series A Preferred
Stock, based on the Articles of Incorporation of Power Mining Group, Inc, filed with the State of Colorado.
On July 6, 2018 the Company issued
1,715,961 shares of common stock value at the conversion price of $0.3897. 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,
interest 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.
On August 8, 2018 the Company issued
812,000 shares of common stock value at the conversion price of $0.06. The shares were issued to convert $44,016 of the principal
amount and $4,204 interest of the Note dated as of March 27, 2017, having as beneficiary to Crown Bridge Partners LLC.
On September 12, 2018 the Company
issued 2,450,000 shares of common stock value at the conversion price of $0.0413. The shares were issued to convert $101,283.00
of principal, interest including penalty charge of the Note dated as of May 15, 2017, having as beneficiary to S&E Capital,
LLC.
Change In Officers and Directors
On May 10, 2018, the Company appointed
Yaniv Nahon, a member of its Board of Directors. Following Mr. Nahon's appointment and acceptance as a member of the Board of Directors,
the Board of Directors accepted the resignation of Richard Davis 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. Davis, the Board of Directors
appointed Yaniv Nahon, 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 Yaniv Nahon.
Mr. Davis did not resign as a result
of any disagreement with the Company on any matter relating to the Company's operations, policies or practices.
On August 1, 2018, the Company appointed
Dror Svorai to 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, as of August 1, 2018, the sole member of the Board of Directors and sole
officer of the Company 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.
Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements and Associated Risks.
This form 10-Q contains certain
statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose,
any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"estimate, or "continue" or comparable terminology are intended to identify forward-looking statements. These statements
by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of
factors, many of which are not within our control. These factors include but are not limited to economic conditions generally and
in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors;
technological advances and failure to successfully develop business relationships.
Goin
g
Concern
Based on our financial history since
inception, our auditor has expressed substantial doubt as to our ability to continue as a going concern. As reflected in the accompanying
financial statements, as of March 31, 2018, we had an accumulated deficit totaling $1,233,459. This raises substantial doubts about
our ability to continue as a going concern.
Plan of Operation
The Company was incorporated under
the laws of the State of Florida on July 29, 2013. The Company was established to manufacture and distribute high-quality, hand
rolled, premium cigars under the Rich Cigars brand name. Beginning January 1, 2018 the Company wound down and discontinued its
operations pertaining to the manufacture and distribution of cigars. Effective at the same date, the Company began the process
of re-focusing its operations to become a holding company wherein its primary focus would be to own and operate subsidiary companies
in the cryptocurrency business, principally companies either engaged in cryptocurrency mining directly, data center operations
for cryptomining, or the development of proprietary products and services for the cryptocurrency business sector itself. The Company
is confident that it will be able to implement its new focus and strategy in the third quarter of 2018.
Results of Operations
Three Months
For the three months ended March
31, 2018, we had $0 in revenues and $0 in cost of goods sold compared to $2,497 and $1,651 respectively for the same period one
year earlier. For the three months ended March 31, 2018, our total operating expenses were $38,301 as compared to $114,381 for
the three months ended March 31, 2017. For the three months ended March 31, 2018, we incurred expenses of $14,000 for officers'
compensation compared to $25,465 for the same period in 2017. For the three months ended March 31, 2018, we incurred professional
fees in the amount of $14,549, compared to $28,912 for the corresponding period in 2017. For the three months ended March 31, 2018,
we incurred $9,752 for other general and administrative expenses, which was up from $4,901 for the same period in 2017. The changes
in these categories and the reduction in total operating expenses were due to the wind down and discontinuation of the prior cigar
business
.
On February 15, 2018 certain Note
issued, dated May 15, 2017 in the principal amount of $375,000 on which the sum of $37,500 was advanced between Rich Cigars, Inc
and Kodiak Capital Group, LLC, has a debt increase due to penalties and interests and then Kodiak Capital Group, LLC sold such
note to S&E Capital, Inc. As a result of the modification on the note’s value this Amendment is being filed solely to
correct entries in the Original Filing and the Amendment No 1. As a consequence of that the Company had an increase in current
liabilities of $ 70,485 and a decrease in shareholder’s deficit of $70,485. Total Net Income (loss) decreased by $ 70,485.
Net cash used in operating activities
continuing operations of ($38,301) remains equal as well as the increase in Net cash provided by financing activities of $38,301
as a result of this adjustment.
Liquidity and Capital Resources
for the next twelve months is through
the sale of shares of our common stock, third party financing, and/or traditional bank financing. We do not anticipate generating
sufficient amounts of revenues to meet our working capital requirements. Consequently, we intend to make appropriate plans to insure
sources of additional capital in the future to fund growth and expansion through additional equity or debt financing or credit
facilities.
The Company must raise additional
funds in order to fund our continued operations. We may not be successful in our efforts to raise additional funds or achieve profitable
operations. Even if we are able to raise additional funds through the sale of our securities or through the issuance of debt securities,
or loans from our directors or financial institutions our cash needs could be greater than anticipated in which case we could be
forced to raise additional capital. At the present time, we have no commitments for any additional financing, and there can be
no assurance that, if needed, additional capital will be available to us on commercially acceptable terms or at all. These conditions
raise substantial doubt as to our ability to continue as a going concern, which may make it more difficult for us to raise additional
capital when needed. If we cannot get the needed capital, we may not be able to become profitable and may have to curtail or cease
our operations.
Operating Activities
During the three months ended March
31, 2018, the Company used cash in the amount of ($38,301) in operating activities compared to ($109,016) used during over the
same period in 2017.
Financing Activities
During the quarter ended March 31,
2018, $38,301 in net cash was provided to the Company from its financing activities, from related party loans compared to $111,850
provided from financing activity during the same period in 2017 from shareholder contributions and proceeds of convertible debts.
We intend to seek additional funding
through public or private financings to fund our operations through fiscal 2018 and beyond. However, if we are unable to raise
additional capital when required or on acceptable terms, or achieve
cash flow positive operations, we
may have to significantly delay product development and scale back operations both of which may affect our ability to continue
as a going concern.
Investing Activities
During the three months ended March 31, 2018
and 2017 $0 in net cash was provided to the Company from investing activities
Off Balance Sheet Arrangements
None