Notes
to the Amended Consolidated Financial Statements
June
30, 2018 (Unaudited and Restated)
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: 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 $ 1,875,178 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
3: 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 (Restated)
|
|
Three Months Ended June 30 2017
|
|
Six Months Ended June 30 2018 (Restated)
|
|
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
4: 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.
As
of June 30, 2018 and 2017, the Company had convertible notes that were convertible into 4,062,347 and 4,954,172 shares of common
stock, respectively. However, the notes were anti-dilutive , for the three months ended June 30, 2018 and the three and six
months ended June 30, 2017 .
The
following table presents the components of the computation of basic and diluted earnings per share for the periods with losses
indicated:
|
|
Three Months Ended June 30
|
|
Six Months Ended June 30
|
|
|
2018 (Restated)
|
|
2017
|
|
2018 (Restated)
|
|
2017
|
Numerator
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shareholders
|
|
|
(641,720
|
)
|
|
|
(51,267
|
)
|
|
|
3,347,781
|
|
|
|
(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
|
|
|
|
|
|
|
|
|
|
|
4,062,347
|
|
|
|
|
|
Weighted average common shares outstanding, diluted
|
|
|
42,787,728
|
|
|
|
2,712,980
|
|
|
|
1,000,914,420
|
|
|
|
2,688,865
|
|
Net Income per share - Basic -
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.13
|
)
|
Income per shares - Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.13
|
)
|
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 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 of63.54%, 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 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
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 $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 .
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 June 30, 2018 dividend yield of zero, 0.25 year term to maturity, risk free interest rate of 1.93% and
annualized volatility of 38.55%, 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. Face Value balance as of December 31, 2017
was $34,084 and as of June 30, 2018 was $151,058 .
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
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 June 30, 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
|
|
June 30, 2018 (Unaudited, and Filed)
|
|
June 30, 2018 (Adjustments)
|
|
June 30, 2018 (Unaudited and Restated)
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
4,953
|
|
|
$
|
—
|
|
|
$
|
4,953
|
|
Total current liabilities
|
|
$
|
637,650
|
|
|
$
|
448,567
|
|
|
$
|
1,086,217
|
|
Total shareholders' equity (deficit)
|
|
$
|
(753,997
|
)
|
|
$
|
(448,567
|
)
|
|
$
|
(1,202,564
|
)
|
|
|
|
|
|
|
|
Statement of Operations
|
|
For the three months ended
|
|
|
June 30, 2018 (Unaudited, and Filed)
|
|
June 30, 2018 (Adjustments)
|
|
June 30, 2018 (Unaudited and Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expense
|
|
$
|
(15,648
|
)
|
|
|
|
|
|
$
|
(15,648
|
)
|
Total other income (expense)
|
|
$
|
(247,989
|
)
|
|
$
|
(378,083
|
)
|
|
$
|
(626,072
|
)
|
Income (Loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from discontinued operations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
NET INCOME(LOSS)
|
|
$
|
(263,637
|
)
|
|
$
|
(378,083
|
)
|
|
$
|
(641,719
|
)
|
Net income (loss) per share applicable to common stockholders - basic (continuing operations)
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
Net income (loss) per share applicable to common stockholders - basic (discontinued operations)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net income (loss) per share applicable to common stockholders - diluted (continuing operations)
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
Net income (loss) per share applicable to common stockholders - diluted (discontinued operations)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Weighted average number of common shares outstanding - basic
|
|
|
42,787,728
|
|
|
|
|
|
|
|
42,787,728
|
|
Weighted average number of common shares outstanding - diluted
|
|
|
42,787,728
|
|
|
|
|
|
|
|
42,787,728
|
|
Statement of Operations
|
|
For the six months ended
|
|
|
June 30, 2018 (Unaudited, and Filed)
|
|
June 30, 2018 (Adjustments)
|
|
June 30, 2018 (Unaudited and Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expense
|
|
$
|
(53,948
|
)
|
|
|
|
|
|
$
|
(53,948
|
)
|
Total other income (expense)
|
|
$
|
3,850,296
|
|
|
$
|
(448,567
|
)
|
|
$
|
3,401,729
|
|
Income (Loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from discontinued operations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
NET INCOME(LOSS)
|
|
$
|
3,796,348
|
|
|
$
|
(448,567
|
)
|
|
$
|
3,347,781
|
|
Net income (loss) per share applicable to common stockholders - basic (continuing operations)
|
|
$
|
0.11
|
|
|
$
|
—
|
|
|
$
|
0.10
|
|
Net income (loss) per share applicable to common stockholders - basic (discontinued operations)
|
|
$
|
0.00
|
|
|
$
|
—
|
|
|
$
|
0.00
|
|
Net income (loss) per share applicable to common stockholders - diluted (continuing operations)
|
|
$
|
0.00
|
|
|
$
|
—
|
|
|
$
|
0.00
|
|
Net income (loss) per share applicable to common stockholders - diluted (discontinued operations)
|
|
$
|
0.00
|
|
|
$
|
—
|
|
|
$
|
0.00
|
|
Weighted average number of common shares outstanding - basic
|
|
|
33,852,073
|
|
|
|
|
|
|
|
33,852,073
|
|
Weighted average number of common shares outstanding - diluted
|
|
|
998,371,855
|
|
|
|
2,542,565
|
|
|
|
1,000,914,420
|
|
Statements of Cash Flow
|
|
For the Six months ended
|
|
|
June 30, 2018 (Unaudited and Filed)
|
|
June 30, 2018 (Adjustments)
|
|
June 30, 2018 (Unaudited and Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities continuing operations
|
|
$
|
(54,198
|
)
|
|
$
|
—
|
|
|
$
|
(54,198
|
)
|
Net cash provided by financing activities
|
|
$
|
54,651
|
|
|
$
|
—
|
|
|
$
|
54,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
$
|
453
|
|
|
$
|
—
|
|
|
$
|
453
|
|
CASH, beginning of period
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
CASH, end of period
|
|
$
|
453
|
|
|
$
|
—
|
|
|
$
|
453
|
|
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 of20,000 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
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 June 30,
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 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.
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.
Going
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 restated statements, as of June 30, 2018, we had an accumulated deficit totaling
$1,875,178. 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 on 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 Ended June 30, 2018 Compared to June 30, 2017
For
the three months ended June 30, 2018, we had $0 in revenues and $0 in cost of goods sold compared to $2,109 and $731 respectively
for the same period one year earlier. For the three months ended June 30, 2018, our total operating expenses was $15,648 as compared
to $155,441 for the three months ended June 30, 2017. For the three months ended June 30, 2018, we incurred expenses of $0 for
officers' compensation compared to $48,183 for the same period in 2017. For the three months ended June 30, 2018, we incurred
professional fees in the amount of $15,618, compared to $19,051 for the corresponding period in 2017. For the three months ended
June 30, 2018, we incurred $30 for other general and administrative expenses, compared to $20,347 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.
For
the three months ended June 30, 2018, we had ($68,359) in interest expenses compared to ($7,969) for the same period one year
earlier. For the three months ended June 30, 2018, we had ($557,463) in Change in fair value of derivative liability and $514,616
for the same period one year earlier. For the three months ended June 30, 2018 we had $0 in Beneficial conversion feature and
derivative interest compared to ($403,851) for the same period one year earlier. For the three months ended June 30, 2018 we had
($250) in Subscription receivable write off, compared to $0 as for the same period one year earlier. For the three months ended
June 30, 2018 we had a Net Income(loss) of ($641,720) compared to ($51,267) for the same period one year earlier.
Six
Months Ended June 30, 2018 Compared to June 30, 2017
For
the six months ended June 30, 2018, we had $0 in revenues and $0 in cost of goods sold compared to $4,606 and $2,382 respectively
for the same period one year earlier. For the six months ended June 30, 2018, our total operating expenses was $53,948 as compared
to $269,824 for the six months ended June 30, 2017. For the six months ended June 30, 2018, we incurred expenses of $14,000 for
officers' compensation compared to $73,648 for the same period in 2017. For the six months ended June 30, 2018, we incurred professional
fees in the amount of $30,167, compared to $47,963 for the corresponding period in 2017. For the six months ended June 30, 2018,
we incurred $9,781 for other general and administrative expenses, compared to $25,249 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.
For
the six months ended June 30, 2018, we had ($349,143) in interest expenses compared to ($8,266) for the same period one year earlier.
For the six months ended June 30, 2018, we had $7,296,786 in Change in fair value of derivative liability and $438,792 for the
same period one year earlier. For the six months ended June 30, 2018 we had ($498) in Fixed Asset Write-off and $0 for the same
period one year earlier. For the six months ended June 30, 2018 we had $0 in Beneficial conversion feature and derivative interest
compared to ($512,403) for the same period one year earlier. For the six months ended June 30, 2018 we had ($250) in Subscription
receivable write off compared to $0 as for the same period one year earlier. For the six months ended June 30, 2018 we had a Net
Income(loss) of $3,347,781 compared to ($349,477) for the same period one year earlier.
Liquidity
and Capital Resources
As
of June 30, 2018, our cash balance was $453 as compared to $0 at December 31, 2017. Our plan for satisfying our cash requirements
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 six months ended June 30, 2018, the Company used cash in the amount of ($54,198) in operating activities, compared to ($244,860)
over the same period in 2017.
Financing
Activities
During
the six months ended June 30, 2018, $54,651 in net cash was provided to the Company from its financing activities, compared to
$240,600 over the same period in 2017.
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.
Off
Balance Sheet Arrangements
None