The accompanying notes are an integral part of these condensed unaudited financial statements.
The accompanying notes are an integral part of these condensed unaudited financial statements.
The accompanying notes are an integral part of these condensed unaudited financial statements.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2018
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
GreenBox POS LLC (“GreenBox” or the “Company”) was originally incorporated on April 10, 2007 under the laws of the State of Nevada as ASAP Expo, Inc. Prior to July 2011, the investment banking services division was the core business of ASAP Expo. ASAP Expo helped small and medium sized businesses raise funds and promote business through capital markets. In July 2011, ASAP Expo transitioned its core business to providing real estate advisory services from investment banking advisory services for Chinese companies and high net worth individuals.
On March 23, 2018, Frank Yuan, the controlling shareholder of ASAP Expo, Inc., entered into a stock purchase agreement whereby it sold 144,445,000 shares of ASAP Expo Inc.'s common stock to GreenBox POS LLC, , representing 90% of ASAP Expo, Inc.'s issued and outstanding shares of common stock. Pursuant to this transaction, on April 12, 2018, ASAP Expo, Inc. entered into an asset purchase agreement whereby it assigned the entirety of its assets to ASAP Property Holdings, Inc. in consideration of assumption of the entirety of its liabilities.
The transaction contemplated in the March 23
rd
stock purchase agreement was closed on May 3, 2018, and a change of control of ASAP Expo, Inc. was effected. Thereafter, the Company changed its name to “GreenBox POS LLC.”
Since April 12, 2018, the Company’s operations have consisted of providing management and business development services.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
Unaudited Interim Financial Information
These unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2018.
The balance sheets and certain comparative information as of December 31, 2017 are derived from the audited financial statements and related notes for the year ended December 31, 2017 (“2017 Annual Financial Statements”), included in the Company's 2017 Annual Report on Form 10-K. These unaudited interim condensed financial statements should be read in conjunction with the 2017 Annual Financial Statements.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand, cash on deposit with banks, and highly liquid debt investments with a maturity of three months or less when purchased. The Company has cash equivalents of $0 and $90,282 as of June 30, 2018 and December 31, 2017, respectively.
GOING CONCERN
As shown in the accompanying financial statements and as discussed in Note 3, all assets and liabilities of the Company were acquired on April 12, 2018. As a result, the previous operations of the Company have been removed, raising substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, prepaid expenses and other receivables, accounts payable, accrued liabilities and due to/from affiliated company. The fair value of these financial instruments approximate their carrying amounts reported in the balance sheets due to the short term maturity of these instruments.
Fair Value Measurements
ASC Topic 820,
Fair Value Measurements and Disclosures
, defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company's financial instruments consisted of cash, accounts payable and accrued liabilities, advances to due to or from affiliated companies, notes payable to officers. The estimated fair value of cash, accounts payable and accrued liabilities, due to or from affiliated companies, and notes payable approximates its carrying amount due to the short maturity of these instruments.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Accounting Standards Codification (“ASC”) 606,
Revenue
from Contracts with Customers,
which outlines the basic criteria that must be met to recognize revenue and provide guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with Securities and Exchange Commission. Management believes the Company's revenue recognition policies conform to ASC 606.
Revenues are mainly consulting fees. The consulting fees are recognized when earned. Consulting fees from real estate advisory services that are subject to refund are recorded as deferred revenue until the project is completed and the fees are no longer refundable.
INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net of operating loss carry forwards and credits, by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
EARNINGS PER SHARE
A basic earnings per share is computed by dividing net income to common stockholders by the weighted average number of shares outstanding for the year. Dilutive earnings per share include the effect of any potentially dilutive debt or equity under the treasury stock method, if including such instruments is dilutive. The Company's diluted earnings/loss per share is the same as the basic earnings/loss per share for the three and six months ended June 30, 2018 and 2017, as there are no potential shares outstanding that would have a dilutive effect.
NOTE 2 – RESTATEMENT
This financial statements for the quarter ended June 30, 2018 have been restated to reflect the correct loss on debt settlement that came to management's attention after the financial statements for the six months ended June 30, 2018 was initially filed.
On April 12, 2018, Frank Yuan converted $144,445 of the line of credit to 144,445,000 shares of the Company’s common stock at the price of $0.001 per share. The total fair value of the conversion feature was originally valued at $5,777,800, based on common shares equivalent of 144,445,000 shares of common stock at the current trading price. This resulted in a loss on the settlement of debt in the amount of $5,633,355. The loss was recognized immediately and was first reflected in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which was filed on September 6, 2018.
It came to the management’s attention that the initial valuation approach was not appropriate. The Company was thinly traded with minimal trading activities, and Frank Yuan was the sole shareholder of the Company on the conversion date. ASC 820 defined fair value as, “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The same shares were subsequently sold for $250,000 to a third party on May 3, 2018. The management believes the $250,000 reflects the fair value of the Company common shares on conversion date due to the proximate time period between the conversion date and the stock sale date.
Therefore the Company recorded a loss on the conversion of $105,555 which represented the difference between the principal balance of $144,445 and $250,000.
The impact of those restatements on the June 30, 2018 unaudited financial statements is reflected in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
June 30, 2018
|
|
|
average
|
|
|
|
As Originally
|
|
|
|
|
|
|
|
|
|
|
shares
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Restated
|
|
|
outstanding
|
|
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
4,731,083
|
|
|
|
(5,532,244
|
)
|
|
|
(801,161
|
)
|
|
|
|
|
Retained earnings
|
|
|
(5,149,690
|
)
|
|
|
5,532,244
|
|
|
|
382,554
|
|
|
|
|
|
Stockholders' equity
|
|
|
(259,717
|
)
|
|
|
-
|
|
|
|
(259,717
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statement of Operations - for the three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from discontinued operations, net of income taxes
|
|
|
(5,638,604
|
)
|
|
|
5,532,244
|
|
|
|
(106,360
|
)
|
|
|
|
|
Net income (loss)
|
|
|
(5,638,604
|
)
|
|
|
5,532,244
|
|
|
|
(106,360
|
)
|
|
|
|
|
Basic and diluted income (loss) per share
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
(0.00
|
)
|
|
|
139,842,671
|
|
Basic and diluted income (loss) per share - discontinued operations
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statement of Operations - for the six months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from discontinued operations, net of income taxes
|
|
|
(5,513,132
|
)
|
|
|
5,532,244
|
|
|
|
19,112
|
|
|
|
|
|
Net income (loss)
|
|
|
(5,513,132
|
)
|
|
|
5,532,244
|
|
|
|
19,112
|
|
|
|
|
|
Basic and diluted income (loss) per share
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
0.00
|
|
|
|
77,490,418
|
|
Basic and diluted income (loss) per share - discontinued operations
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
0.00
|
|
|
|
|
|
NOTE
3
- DISCONTINUED OPERATIONS
On April 12, 2018, ASAP Property Holdings Inc. (“Holdings”) entered into an Asset Purchase Agreement (the “Purchase Agreement”) with the Company, to acquire all the assets and all liabilities of the Company (the “Acquired Assets”). On April 12, 2018, the Company completed the sale of its Acquired Assets in an asset purchase transaction (the “Transaction”) pursuant to the terms and conditions of the Purchase Agreement.
As a result of the consummation of the Purchase Agreement, on April 12, 2018, in consideration for the Acquired Assets, Holdings paid the Company $0 in cash and assumed $234,605 of liabilities in excess of assets.
The allocation of the purchase price of the assets acquired and liabilities assumed based on their fair values was as follows:
Cash
|
|
$
|
77,292
|
|
Petty Cash
|
|
|
200
|
|
Other Receivables
|
|
|
30,790
|
|
Accounts Receivable from Affiliates
|
|
|
156,312
|
|
Fixed Assets
|
|
|
-
|
|
Accounts Payable
|
|
|
(218,195
|
)
|
Payroll & Payroll Tax
|
|
|
(68,801
|
)
|
Accrued Expenses
|
|
|
(91,224
|
)
|
Accrued Interest - Solar Equipment
|
|
|
(262
|
)
|
Other Accrued Interest
|
|
|
(35,432
|
)
|
Auto Loan
|
|
|
(4,034
|
)
|
Promissory Note
|
|
|
(54,048
|
)
|
Auto Loan
|
|
|
(14,905
|
)
|
Equipment Loan - Solar Equipment
|
|
|
(12,298
|
)
|
Total
|
|
$
|
(234,605
|
)
|
Losses from discontinued operations during the three months ended June 30, 2018 are $106,360 and net income from discontinued operations during the six months ended June 30, 2018 of $19,112.
Holdings agreed to assume responsibility for and fulfill the tax obligations of the Company. Holdings agrees to indemnify and hold harmless the Company for any liability, costs, and/or fees incurred due to Holdings' failure to fulfill such obligations. Accrued income taxes of $259,717 are recorded as Income tax of discontinued operations payable on the balance sheets.
The Transaction has resulted in the removal of the previous operations of the Company. Since April 12, 2018, the Company’s operations have consisted of providing management and business development services.
Below is a reconciliation of the major classes of line items constituting profit (loss) on discontinued operations that are disclosed in Statements of Operations for the three and six months ended June 30, 2018 and 2017.
|
|
Three Months Ended June 30
|
|
|
Six Months Ended June 30
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(Restated)
|
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting fees
|
|
$
|
95,290
|
|
|
$
|
460,300
|
|
|
$
|
428,334
|
|
|
$
|
829,800
|
|
Management Fee
|
|
|
-
|
|
|
|
24,000
|
|
|
|
255,161
|
|
|
|
43,200
|
|
Total revenues
|
|
|
95,290
|
|
|
|
484,300
|
|
|
|
683,495
|
|
|
|
873,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting expense
|
|
|
21,000
|
|
|
|
141,700
|
|
|
|
120,500
|
|
|
|
393,700
|
|
Total cost of sales
|
|
|
21,000
|
|
|
|
141,700
|
|
|
|
120,500
|
|
|
|
393,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
74,290
|
|
|
|
342,600
|
|
|
|
562,995
|
|
|
|
479,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
118,923
|
|
|
|
256,086
|
|
|
|
422,929
|
|
|
|
392,542
|
|
Total operating expenses
|
|
|
118,923
|
|
|
|
256,086
|
|
|
|
422,929
|
|
|
|
392,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
(44,633
|
)
|
|
|
86,514
|
|
|
|
140,066
|
|
|
|
86,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on asset purchase agreement
|
|
|
159,848
|
|
|
|
-
|
|
|
|
159,848
|
|
|
|
-
|
|
Gain on sale of fixed assets
|
|
|
-
|
|
|
|
5,277
|
|
|
̶
|
|
|
|
5,277
|
|
Loss on settlement of debt
|
|
|
(101,111
|
)
|
|
|
|
|
|
|
(101,111
|
)
|
|
|
-
|
|
Interest expense
|
|
|
(479
|
)
|
|
|
(10,089
|
)
|
|
|
(3,695
|
)
|
|
|
(19,330
|
)
|
Total other income (expense, net)
|
|
|
58,258
|
|
|
|
(4,812
|
)
|
|
|
55,042
|
|
|
|
(14,053
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
13,625
|
|
|
|
81,702
|
|
|
|
195,108
|
|
|
|
72,705
|
|
Income taxes provision
|
|
|
119,985
|
|
|
|
38,147
|
|
|
|
175,996
|
|
|
|
38,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) Income from Discontinued Operations
|
|
$
|
(106,360
|
)
|
|
$
|
43,555
|
|
|
$
|
19,112
|
|
|
$
|
33,758
|
|
The following table summarizes the operating and investing cash flows of discontinued operations for the six months ended June 30, 2018 and 2017.
|
|
Six Months Ended June 30
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Restated)
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
Net Income (loss) from discontinued operations
|
|
$
|
19,112
|
|
|
$
|
33,758
|
|
Adjustments to reconcile net income from discontinued operations
to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
4,004
|
|
|
|
5,092
|
|
Capital gain
|
|
|
-
|
|
|
|
(5,277
|
)
|
Assets distributed in asset purchase agreement, net
|
|
|
(159,848
|
)
|
|
|
-
|
|
Loss on settlement of debt
|
|
|
101,111
|
|
|
|
-
|
|
Conversion of line of credit to common stock
|
|
|
144,445
|
|
|
|
-
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
-
|
|
|
|
(6,000
|
)
|
Prepaid expenses and other current assets
|
|
|
(30,791
|
)
|
|
|
(50,000
|
)
|
Accounts payable and accrued expenses
|
|
|
19,673
|
|
|
|
51,107
|
|
Accrued expenses – officer
|
|
|
(13,648
|
)
|
|
|
-
|
|
Income tax payable
|
|
|
119,184
|
|
|
|
38,147
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
203,242
|
|
|
|
66,827
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
Furniture and equipment sold in asset purchase agreement
|
|
|
(135,431
|
)
|
|
|
-
|
|
Acquisitions of furniture and equipment
|
|
|
-
|
|
|
|
(3,214
|
)
|
Due from affiliated companies
|
|
|
-
|
|
|
|
(56,132
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(135,431
|
)
|
|
|
(59,346
|
)
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
Payments on auto loan
|
|
|
-
|
|
|
|
(1,786
|
)
|
Bank overdraft
|
|
|
-
|
|
|
|
59,409
|
|
Proceeds from borrowings on note payable from officers
|
|
|
-
|
|
|
|
285,112
|
|
Repayments of borrowings on note payable form officers
|
|
|
(158,093
|
)
|
|
|
(382,777
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(158,093
|
)
|
|
|
(40,042
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(90,282
|
)
|
|
|
(32,561
|
)
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
90,282
|
|
|
|
32,761
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
-
|
|
|
$
|
200
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
439
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
800
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities
|
|
|
|
|
|
|
|
|
Vehicle purchased through auto loan
|
|
$
|
-
|
|
|
$
|
22,789
|
|
Conversion of Line of credit, officers to shares of common stock
|
|
$
|
144,445
|
|
|
$
|
-
|
|
NOTE
4
- PROPERTY AND EQUIPMENT
Equipment consists of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Furniture & Fixtures
|
|
$
|
-
|
|
|
$
|
35,812
|
|
Office Equipment
|
|
|
-
|
|
|
|
10,510
|
|
Automobile
|
|
|
-
|
|
|
|
27,657
|
|
Leasehold Improvements
|
|
|
-
|
|
|
|
24,527
|
|
|
|
|
-
|
|
|
|
98,506
|
|
Less: Accumulated Depreciation
|
|
|
-
|
|
|
|
(19,743
|
)
|
|
|
|
-
|
|
|
|
78,763
|
|
Furniture and equipment were sold in the Transaction.
NOTE
5
- RELATED PARTY TRANSACTIONS
At June 30, 2018 and December 31, 2017, GreenBox was owed $0 and $20,881 from affiliated companies in which GreenBox's officers are also owners and officers. The advance has no written note, is non-interest bearing and payable on demand to the Company and expected to be paid within one year.
The Company had a revolving line of credit totaling $1,800,000 with Frank Yuan, CEO and Jerome Yuan, his son. The line of credit bore interest at 6% per annum and was due upon demand, as amended. On December 31, 2014, the convertible note was amended to waive the right of conversion and was to be used as a line of credit. On April 12, 2018, Frank Yuan converted $144,445 of the line of credit to 144,445,000 shares. During the six months ended June 30, 2018 and 2017, the Company incurred interest expense totaling $3,333 and $18,842 in connection with the Line. The balance of the credit line as of June 30, 2018 was $0 and the accrued interest on the line of credit was $0. The balance of the credit line as of December 31, 2017 was $212,140 and the accrued interest was $32,100.
The son of the Company's officer (“Son”) receives salary from the Company for work performed. During three months ended June 30, 2018 and 2017, the Son received salary of $20,000 and $40,000, respectively.
On April 12, 2018, the Company entered into an asset purchase agreement whereby it assigned the entirety of its assets to ASAP Property Holdings, Inc., an affiliated entity owned and operated by Frank Yuan, in consideration of assumption of the entirety of its liabilities.
NOTE
6
- AUTO LOAN
In April 2017, the Company traded-in its old vehicle for a new vehicle with a financing agreement of $4,868 down and 2.39% interest, which was purchased in conjunction with the Transaction. As of June 30, 2018, there are no minimum payments or obligations due by the Company under the auto loan.
NOTE
7
- EQUIPMENT LOAN
In September 2015, the Company installed a solar system on its leased office for $17,570 with a 30-year loan at 5.49% interest. Each payment date, the Company will pay at least “Total Amount Due” that is displayed on the monthly bill. The Total Amount Due will be the sum of all past due amounts plus the “Current Monthly Payment” that will be displayed on the monthly bill. Current Monthly Payments will be calculated as follows: the amount of kWh produced for the preceding month by the system; multiplied by the applicable agreed Equivalent Rate per kWh. The “Equivalent Rate per kWh” is based upon 5 factors: 1) the loan balance (which includes any accrued interest); 2) the Loan Term; 3) the applicable APR; 4) the expected production of the system; and 5) 2.50 % kWh annual rate escalator. The expected production of the system is an estimate, the actual payments could be higher or lower depending on the actual production from the system. If there is a remaining balance at the end of the loan term, the outstanding balance can be refinanced for an additional 12 months or for a term that is required by law. The equipment loan was acquired by Holdings in the Transaction. As of June 30, 2018, there are no estimated future Current Monthly Payments owed by the Company.
NOTE
8
- INCOME TAXES
The income taxes provision for the six months ended June 30, 2018 consists of current income tax of $175,996.
Uncertain Tax Positions
Interest associated with unrecognized tax benefits is classified as income tax and penalties are included in selling, general and administrative expenses in the statements of operations and comprehensive income.
For the three and the six months ended June 30, 2018 and 2017, the Company had no unrecognized tax benefits and related interest and penalties expenses. The Company's 2014, 2015, 2016 and 2017 tax years remain subject to examination by the U.S. tax authorities.
NOTE 9 - SHAREHOLDERS' DEFICIT (RESTATED)
Common Stock
On July 29, 2017, the Board of Directors of the Company approved to increase the authorized shares of the Company to 500,000,000 (the “Increase”), with 495,000,000 shares being Common Stock and 5,000,000 shares being preferred stock, subject to Stockholder approval. The Majority Stockholder approved the Increase by written consent in lieu of a meeting on July 29, 2017. The increased number of authorized shares were retroactively presented on balance sheets.
On April 12, 2018, Frank Yuan converted $144,445 of the line of credit to 144,445,000 shares of the Company's common stock at a price of $0.001 per share. The total fair value of the conversion feature was originally valued at $5,777,800, based on common shares equivalent of 144,445,000 shares of common stock at the then trading price. This resulted in a loss on the settlement of debt in the amount of $5,633,355. The loss was recognized immediately.
It came to the management’s attention that the initial valuation approach was not appropriate. The Company was thinly traded with minimal trading activities, and Frank Yuan was the sole shareholder of the Company on the conversion date. ASC 820 defined fair value as, “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The same shares were subsequently sold for $250,000 to a third party on May 3, 2018. The management believes the $250,000 reflects the fair value of the Company common shares on conversion date due to the proximate time period between the conversion date and the stock sale date.
Therefore the Company recorded a loss on the conversion of $105,555 which represented the difference between the principal balance of $144,445 and $250,000.
At June 30, 2018 and December 31, 2017, the Company had 158,890,363 and 14,445,363 shares, respectively, issued and outstanding at par value $0.001 per share.
NOTE
10
- SUBSEQUENT EVENT
In preparing the condensed consolidated financial statements as of and for the three and six months ended June 30, 2018, the Company has evaluated subsequent events for recognition and measurement purposes. The Company has concluded that the following events require disclosure in the accompanying consolidated financial statements:
Asset Purchase Agreement
On September 4, 2018, the Company came to a preliminary understanding with GreenBox POS LLC, a Washington limited liability company that is the majority shareholder of the Company, pursuant to which it will be assigned any and all assets related to its blockchain gateway and payment system business, point of sale system business, delivery business, kiosk business (collectively, the “Business”), and all intellectual property thereto in consideration of assuming any and all liabilities related to the Business. No agreement has been signed as of this date but the parties are endeavoring to finalize the transaction within thirty (30) days of September 4, 2018.