Quarterly Report (10-q)

Date : 11/20/2017 @ 2:38PM
Source : Edgar (US Regulatory)
Stock : Black Stallion Oil & Gas Inc. (PN) (BLKG)
Quote : 0.0001  0.0 (0.00%) @ 12:14PM

Quarterly Report (10-q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2017

 

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

 

For the transition period from ______ to _______

 

Commission File Number 333-180230

 

BLACK STALLION OIL AND GAS INC.

(Name of small business issuer in its charter)

  

Delaware

99-0373017

(State of incorporation)

(I.R.S. Employer Identification No.)

 

50 Fountain Plaza, Suite 1400 Buffalo, NY 14202

(Address of principal executive offices)

 

( 716) 961-3244

(Registrant’s telephone number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

o

Accelerated filer

o

Non-accelerated filer

o

Smaller reporting company

x

(Do not check if a smaller reporting company)

Emerging growth company

o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

As of October 20, 2017, there were 2,837,152,976 shares of the registrant’s $0.0001 par value common stock issued and outstanding.

 

 
 
 

 

BLACK STALLION OIL AND GAS INC.

 

TABLE OF CONTENTS

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

ITEM 1.

FINANCIAL STATEMENTS

 

 

4

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

21

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

 

25

 

ITEM 4.

CONTROLS AND PROCEDURES

 

 

25

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

 

 

26

 

ITEM 1A.

RISK FACTORS

 

 

26

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

 

26

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

 

26

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

 

26

 

ITEM 5.

OTHER INFORMATION

 

 

26

 

ITEM 6.

EXHIBITS

 

 

27

 

 

 
2
 
 

 

Special Note Regarding Forward-Looking Statements

 

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Black Stallion Oil & Gas Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

Please note that throughout this Quarterly Report, and unless otherwise noted, the words "Black Stallion,” "we,” "our," "us," the "Company," refers to Black Stallion Oil and Gas Inc.

 

 
3
 
Table of Contents

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

BLACK STALLION OIL AND GAS INC.

BALANCE SHEETS

 

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

(Unaudited)

 

 

 

 

ASSETS

Current Assets

 

 

 

 

 

 

Cash

 

$ 2,709

 

 

$ -

 

Loan to related party

 

 

163,471

 

 

 

41,654

 

Prepaid expenses

 

 

173,291

 

 

 

118,787

 

Total Current Assets

 

 

339,471

 

 

 

160,441

 

 

 

 

 

 

 

 

 

 

Working interest in oil and gas leases

 

 

850,000

 

 

 

850,000

 

Intangible assets, net

 

 

-

 

 

 

1,158

 

TOTAL ASSETS

 

$ 1,189,471

 

 

$ 1,011,599

 

 

 

 

 

 

 

 

 

 

LIABILITIES

Current Liabilities:

 

 

 

 

 

 

 

 

Bank overdraft

 

$ -

 

 

$ 276

 

Accounts payable and accrued liabilities

 

 

16,133

 

 

 

26,554

 

Accrued wages

 

 

8,025

 

 

 

63,900

 

Convertible notes payable, net of discount

 

 

433,152

 

 

 

115,477

 

Convertible notes payable, interest

 

 

39,570

 

 

 

6,680

 

Derivative liabilities

 

 

1,087,501

 

 

 

405,929

 

Total Current Liabilities

 

 

1,584,381

 

 

 

618,816

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

$ 1,584,381

 

 

$ 618,816

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Preferred stock, Series B, $0.0001 par value 1,000 authorized

 

 

 

 

 

 

 

 

1,000 shares issued and outstanding at September 30, 2017

 

 

-

 

 

 

-

 

0 shares issued and outstanding at December 31, 2016

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value 25,000,000,000 authorized

2,651,317,176 shares issued and outstanding at September 30, 2017

145,163,921 shares issued and outstanding at December 31, 2016

 

 

283,715

 

 

 

14,516

 

Additional paid in capital

 

 

3,947,548

 

 

 

2,191,673

 

Common stock subscribed but unissued

 

 

-

 

 

 

150,000

 

Accumulated deficit

 

 

(4,626,173 )

 

 

(1,963,406 )

Total Shareholders' Equity

 

 

(394,910 )

 

 

392,783

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$ 1,189,471

 

 

$ 1,011,599

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

 
4
 
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BLACK STALLION OIL AND GAS INC.

STATEMENT OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization

 

 

-

 

 

 

580

 

 

 

1,158

 

 

 

1,738

 

Consulting

 

 

88,950

 

 

 

6,260

 

 

 

183,617

 

 

 

7,260

 

Contractors

 

 

19,932

 

 

 

116,567

 

 

 

228,929

 

 

 

250,330

 

Filing

 

 

5,360

 

 

 

4,256

 

 

 

16,963

 

 

 

10,437

 

Finder's fee

 

 

-

 

 

 

-

 

 

 

-

 

 

 

24,970

 

Other G&A expenses

 

 

10,091

 

 

 

2,406

 

 

 

18,277

 

 

 

4,417

 

Penalties

 

 

-

 

 

 

-

 

 

 

24,500

 

 

 

-

 

Professional fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounting

 

 

3,225

 

 

 

-

 

 

 

11,246

 

 

 

1,500

 

Auditor fees

 

 

3,500

 

 

 

4,000

 

 

 

7,500

 

 

 

12,000

 

Legal fees

 

 

-

 

 

 

38,000

 

 

 

60,196

 

 

 

43,988

 

Set-up fees

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,119

 

Rent expenses

 

 

1,329

 

 

 

780

 

 

 

2,894

 

 

 

6,497

 

Total Operating expenses

 

 

132,387

 

 

 

172,849

 

 

 

555,280

 

 

 

365,256

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(132,387 )

 

 

(172,849 )

 

 

(555,280 )

 

 

(365,256 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on derivative liability valuation

 

 

56,741

 

 

 

-

 

 

 

(310,409 )

 

 

-

 

Gain (loss) on settlement of debt

 

 

47,992

 

 

 

-

 

 

 

47,992

 

 

 

-

 

Interest expenses

 

 

(351,624 )

 

 

(96,136 )

 

 

(1,845,070 )

 

 

(183,938 )

Total other income/expenses

 

 

(246,891 )

 

 

(96,136 )

 

 

(2,107,487 )

 

 

(183,938 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

 

(379,278 )

 

 

(268,985 )

 

 

(2,662,767 )

 

 

(549,194 )

Income tax expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net loss

 

$ (379,278 )

 

$ (268,985 )

 

$ (2,662,767 )

 

$ (549,194 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per share information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted number of common shares outstanding,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

basic and diluted

 

 

373,389,433

 

 

 

78,312,229

 

 

 

1,238,070,517

 

 

 

56,608,969

 

Net loss per common share

 

 

(0.00102 )

 

 

(0.0034 )

 

 

(0.00215 )

 

 

(0.0097 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

 
5
 
Table of Contents

 

BLACK STALLION OIL AND GAS INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

For the nine months ended

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

Increase (decrease) in cash and cash equivalents:

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net profit (loss)

 

$ (2,662,767 )

 

$ (549,194 )

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Change in debt discount/note premium

 

 

(116,559 )

 

 

-

 

Depreciation and amortization

 

 

1,158

 

 

 

1,737

 

Change in derivative liabilities

 

 

681,572

 

 

 

-

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Decrease (increase) in prepaid expenses

 

 

(54,504 )

 

 

(261,391 )

Decrease (increase) in due from related party

 

 

(121,817 )

 

 

16,750

 

Increase (decrease) in accounts payable

 

 

(10,421 )

 

 

(109,688 )

Increase (decrease) in accrued expenses

 

 

(55,875 )

 

 

192,425

 

Increase (decrease) in interest payable

 

 

32,890

 

 

 

11,721

 

Net cash used in operating activities

 

 

(2,306,323 )

 

 

(697,640 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Bank overdraft

 

 

(276 )

 

 

-

 

Proceeds from notes payable

 

 

434,234

 

 

 

197,100

 

Proceeds from the sale of common stock and warrants

 

 

-

 

 

 

509,617

 

Issuance of common stock

 

 

1,875,074

 

 

 

-

 

Net cash provided by financing activities

 

 

2,309,032

 

 

 

706,717

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash

 

 

2,709

 

 

 

9,077

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beg of year

 

 

-

 

 

 

216

 

Cash and cash equivalents, end of year

 

$ 2,709

 

 

$ 9,293

 

 

 

 

 

 

 

 

 

 

Supplemental schedule of noncash investing & financing activities:

 

 

 

 

 

 

 

 

Shares issued to settle debt

 

$ 54,400

 

 

 

-

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

 
6
 
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NOTES TO THE INTERIM FINANCIAL STATEMENTS

September 30, 2017

(Unaudited)

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization and Description of Business

 

Black Stallion Oil and Gas Inc. (the “Company”) is a Delaware corporation. The Company's business plan involves exploration and development of oil and gas properties.

 

On September 10, 2013, the Company changed its name to Black Stallion Oil and Gas Inc (formerly Secure IT Corp) and changed its business plan to that of exploration and development of oil and gas properties.

 

On August 8, 2017, the Company entered into a Licensing Agreement with Active Lab International, Inc., for the distribution rights of the products of Active Lab, which include Citrus Defence® and Synapset®.

 

On August 22, the Company announced that it is preparing to implement its corporate strategies through various ‎platforms. With the recently announced execution of the Licensing Agreement with Active Lab International, Inc., the Company has established an online retailer that will provide the launch pad for the next phase of the Company’s multi-platform expansion . The platform that will be the driving force behind this expansion is the inclusion of "Alt-Currencies," or better known as, "Cryptocurrency." This will include the popular currencies such as Bitcoin and Ethereum.

 

On September 22, 2017, the Company determined that with the Company’s recent changes related to the Licensing Agreement with Active Lab, as well as the future plans of the Company, a name change was warranted. The Board of Directors have authorized the filing with the State of Delaware to change its name to Arize Therapeutics, Inc. The Company will be filing for a symbol change.

 

Basis of Presentation

 

The accompanying unaudited interim consolidated financial statements of Black Stallion Oil and Gas Inc. (“BLKG” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report for the year ended December 31, 2016 on Form 10-K filed on May 8, 2017.

 

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year ended December 31, 2016 have been omitted.

 

Cash and Cash Equivalents

 

Cash and equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. As of September 30, 2017 and December 31, 2016, the Company had no cash equivalents.

 

 
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Oil and natural gas properties

 

The Company follows the full-cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.

 

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is included in loss from continuing operations before income taxes and the adjusted carrying amount of the unproved properties is amortized on the unit-of-production method.

 

The Company’s oil and gas property represents an investment in unproved properties. These costs are excluded from the amortized cost pool until proved reserves are found or until it is determined that the costs are impaired. All costs excluded are reviewed at least quarterly to determine if impairment has occurred. The amount of any impairment is charged to expense since a reserve base has not yet been established. Impairment requiring a charge to expense may be indicated through evaluation of drilling results, relinquishing drilling rights or other information.

 

Currently, the Company has no economically recoverable reserves and no amortization base. As of September 30, 2017, the Company’s unproved oil and gas properties consist of capitalized exploration costs of caring value of $850,000.

 

Oil and Gas Properties and Impairment

 

The Company follows the full-cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.

 

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is included in loss from continuing operations before income taxes and the adjusted carrying amount of the unproved properties is amortized on the unit-of-production method.

 

Impairment of Long Lived Assets

 

The Company reviews and evaluates long-term assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of ASC 930-360-35 Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Term Assets.

 

 
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Limitation on Capitalized Costs

 

Under the full-cost method of accounting, we are required, at the end of each fiscal quarter, to perform a test to determine the limit on the book value of our oil and natural gas properties (the "Ceiling Test"). If the capitalized costs of our oil and natural gas properties, net of accumulated amortization and related deferred income taxes, exceed the "Ceiling", this excess or impairment is charged to expense and reflected as additional accumulated depreciation, depletion and amortization or as a credit to oil and natural gas properties. The expense may not be reversed in future periods, even though higher oil and natural gas prices may subsequently increase the Ceiling. The Ceiling is defined as the sum of: (a) the present value, discounted at 10 percent, and assuming continuation of existing economic conditions, of 1) estimated future gross revenues from proved reserves, which is computed using oil and natural gas prices determined as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period (with consideration of price changes only to the extent provided by contractual arrangements including hedging arrangements pursuant to SAB 103), less 2) estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves; plus (b) the cost of properties not being amortized (pursuant to Reg. S-X Rule 4-10 (c)(3)(ii)); plus (c) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; net of (d) the related tax effects related to the difference between the book and tax basis of our oil and natural gas properties.

 

Long Lived Assets Including Goodwill and Other Acquired Intangible Assets

 

The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment. The Company typically amortizes its acquired intangible assets with definite useful lives over periods from three to seven years.

 

Revenue Recognition

 

The Company recognizes revenue on arrangements in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

 

Accounts Receivable and Uncollectible Receivables

 

Accounts Receivable are recorded at the invoiced amount to the customer and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business, but mitigates associated risks by actively pursuing past due accounts. Receivables that are over 180 days past due are deemed uncollectible and are written off to the statement of operations. During the nine months ended September 30, 2017 and 2016 no receivables were written off as uncollectible.

 

Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the fiscal year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

 

 
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Use of Estimates

 

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles of United States of America 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.

 

Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Actual results could differ from those estimates.

 

Loss Per Share

 

Basic loss per share of common stock is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is equal to the basic per share for the three and nine months ended September 30, 2017 and 2016. Common stock equivalents are not included in the loss per share since they are anti-dilutive.

 

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

 

In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels and which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

 

These levels are:

 

Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

 

Level 2 - inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

 

 
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Financial assets and liabilities measured at fair value on a recurring basis:

 

 

 

Input

 

 

September 30,
2017

 

 

December 31,
2016

 

 

 

Level

 

 

Fair Value

 

 

Fair Value

 

Derivative Liability

 

 

3

 

 

$ 1,087,501

 

 

$ 405,929

 

Total Financial Liabilities

 

 

 

 

 

$ 1,087,501

 

 

$ 405,929

 

 

In management’s opinion, the fair value of convertible notes payable and advances payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments. As of September 30, 2017 and December 31, 2016, the balances reported for cash, accounts receivable, prepaid expenses, accounts payable, and accrued liabilities, approximate the fair value because of their short maturities.

 

Income Taxes

 

The Company records deferred taxes in accordance with FASB ASC No. 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (ASC Topic 606). ASU 2014-09 creates a new topic in the ASC Topic 606 and establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics, and expands and improves disclosures about revenue. In addition, ASU 2014-09 adds a new Subtopic to the Codification, ASC 340-40, Other Assets and Deferred Costs: Contracts with Customers, to provide guidance on costs related to obtaining a contract with a customer and costs incurred in fulfilling a contract with a customer that are not in the scope of another ASC Topic. The guidance in ASU 2014-09 is effective for public entities for annual reporting periods beginning after December 15, 2016, including interim periods therein. Early application is not permitted. Management is in the process of assessing the impact of ASU 2014-09 on the Company’s financial statements.

 

In February 2016, the FASB issued ASU 2016-02 (ASC Topic 842), Leases. The ASU amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of assessing the impact on its consolidated financial statements.

 

 
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2. GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of September 30, 2017, the Company has insufficient working capital, has accumulated losses from operations of $4,626,173 and has earned no revenues since inception. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements.

 

To carry out further planned operations, the Company must raise additional funds through additional equity and/or debt issuances. There can be no assurance that this capital will be available, and if it is not, the Company may be forced to curtail or cease exploration and development activities. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

3. WORKING INTEREST IN OIL AND GAS LEASES

 

On February 23, 2014, the Company entered into a Lease Assignment Agreement with West Bakken Energy Holdings Ltd to acquire from an unaffiliated oil and gas company, an undivided 100% interests (a 50% working interest) in certain oil and gas properties, comprising approximately 12,233.93 acres of land located in Montana, United States.

 

 

-

As consideration, the Company has agreed to issue 1,100,000 shares of common stock to West Bakken Energy Holdings Ltd at a purchase price of $0.50 per share of common stock, a total of $550,000. The shares were issued to West Bakken Energy Holdings Ltd on August 19, 2015.

 

On October 2, 2015, the Company entered into a Lease Assignment Agreement with Hillcrest Exploration Ltd to acquire from an unaffiliated oil and gas company, the remaining 50% working interest in certain oil and gas properties, comprising approximately 12,233.93 acres of land located in Montana, United States.

 

 

-

As consideration, the Company agreed to issue 500,000 shares of common stock to Hillcrest Exploration Ltd at a purchase price of $1 per share and $50,000 cash for total proceeds of $550,000.

 

-

Of the total consideration, $50,000 cash and 250,000 common shares were paid on the date of closing which occurred on October 27, 2015. The remaining 250,000 common shares are contingent and are to be paid on the date that Black Stallion spuds its first oil well on the property. Due to the uncertain nature of oil drilling, management is unable to state that this event is more likely that not to occur. Therefore, the total cost capitalized and payable is excluding this amount and will be reassessed at a future date.

 

 
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4. INTANGIBLE ASSETS

 

 

 

September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

Gross

 

 

 

 

 

 

 

Average

 

 

 

Carrying

 

 

Accumulated

 

 

Net Carrying

 

 

Useful Life

 

 

 

Amount

 

 

Amortization

 

 

Amount

 

 

(in Years)

 

Intellectual property - website

 

$ 6,950

 

 

$ (6,950 )

 

$ 0

 

 

 

3

 

Total finite-lived intangible assets

 

$ 6,950

 

 

$ (6,950 )

 

$ 0

 

 

 

 

 

 

Intangible assets consist of capitalized website development costs. The website entered its operating stage during July 2014. Amortization expenses of $1,158 have been recorded for the nine months ended September 30, 2017.

 

5. PREPAID EXPENSES

 

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Prepaid expenses

 

$ 173,291

 

 

$ 118,787

 

 

Prepaid contracting expenses represent amounts paid in advance for future contractual benefits to be received. Contracting expenses paid in advance are recorded as a prepaid asset and then amortized to the statements of operations over the life of the contract using the straight-line method.

 

On July 15, 2016, the Company entered into a 5-year contracting arrangement with a related party for contracting services related to expertise and experience in raising finance. As compensation for contractor services the Company will pay the contractor fees of $120,000 annually in advance. During the nine months ended September 30, 2017, $64,438 ($55,562 – September 30, 2016), has been amortized to the statement of operations to contractor fees, leaving a prepaid fee balance of $0.

 

On January 3, 2017, the Company entered into a consulting agreement for total amount of $50,000. During the nine months ended June 30, 2017, $37,500 has been amortized to the statement of operations to consulting fees, leaving a prepaid fee balance of $12,500.

 

On January 7, 2017, the Company entered into a consulting agreement for total amount of $100,000. During the nine months ended June 30, 2017, $75,000 has been amortized to the statement of operations to consulting fees, leaving a prepaid fee balance of $25,000.

 

On May 25, 2017, the Company entered into a consulting agreement for total amount of $100,000. As of September 30, 2017, $33,333 has been amortized to the statement of operations to consulting fees, leaving a prepaid fee balance of $66,667.

 

On May 25, 2017, the Company entered into a consulting agreement for total amount of $100,000. As of September 30, 2017, $33,333 has been amortized to the statement of operations to consulting fees, leaving a prepaid fee balance of $66,667.

 

 
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6. CONVERTIBLE NOTES PAYABLE

 

As of September 30, 2017, and December 31, 2016, notes payable comprised as the following:

 

 

 

Original

 

Due

 

Interest

 

 

Conversion

 

September 30,

 

 

December 31,

 

 

 

Note Date

 

Date

 

Rate

 

 

Rate

 

2017

 

 

2016

 

Adar Bays

 

10/31/2016

 

10/31/2017

 

 

8 %

 

Variable

 

$ -

 

 

$ 25,000

 

Adar Bays

 

6/16/2017

 

6/16/2018

 

 

8 %

 

Variable

 

 

40,000

 

 

 

-

 

Adar Bays

 

6/16/2017

 

6/16/2018

 

 

8 %

 

Variable

 

 

49,555

 

 

 

-

 

Adar Bays

 

6/16/2017

 

6/16/2018

 

 

8 %

 

Variable

 

 

-

 

 

 

-

 

Blue Comet

 

1/7/2017

 

1/7/2018

 

 

12 %

 

Variable

 

 

100,000

 

 

 

-

 

Brian Kenny

 

2/21/2017

 

2/21/2018

 

 

8 %

 

Variable

 

 

25,000

 

 

 

-

 

Crown Bridge Partners

 

7/12/2016

 

7/12/2017

 

 

8 %

 

Variable

 

 

-

 

 

 

46,000

 

Crown Bridge Partners

 

1/20/2017

 

1/20/2018

 

 

8 %

 

Variable

 

 

3,930

 

 

 

-

 

Eagle Equities

 

1/6/2017

 

1/6/2018

 

 

8 %

 

Variable

 

 

-

 

 

 

-

 

Eagle Equities

 

2/16/2017

 

2/16/2018

 

 

8 %

 

Variable

 

 

65,600

 

 

 

-

 

GS Capital Partners

 

5/10/2017

 

5/10/2018

 

 

8 %

 

Variable

 

 

50,000

 

 

 

-

 

GS Capital Partners

 

5/10/2017

 

2/6/2018

 

 

8 %

 

Variable

 

 

32,000

 

 

 

-

 

GS Capital Partners

 

5/11/2017

 

11/8/2017

 

 

8 %

 

Variable

 

 

5,000

 

 

 

-

 

JDF Capital

 

8/12/2016

 

8/12/2017

 

 

8 %

 

Variable

 

 

-

 

 

 

44,250

 

Jordan Booher

 

2/21/2017

 

2/21/2018

 

 

8 %

 

Variable

 

 

25,000

 

 

 

-

 

LG Capital Funding

 

8/12/2016

 

8/12/2017

 

 

8 %

 

Variable

 

 

-

 

 

 

44,250

 

LG Capital Funding

 

3/16/2017

 

3/16/2018

 

 

8 %

 

Variable

 

 

39,150

 

 

 

-

 

Makmo Trading

 

1/3/2017

 

1/3/2018

 

 

12 %

 

Variable

 

 

50,000

 

 

 

-

 

N&M Brands

 

5/25/2017

 

5/25/2018

 

 

12 %

 

Variable

 

 

100,000

 

 

 

-

 

Power Up Lending Group

 

6/12/2017

 

6/12/2018

 

 

12 %

 

Variable

 

 

38,000

 

 

 

-

 

Union Capital

 

9/22/2016

 

2/6/2017

 

 

8 %

 

Variable

 

 

-

 

 

 

50,000

 

Union Capital

 

11/10/2016

 

11/10/2017

 

 

8 %

 

Variable

 

 

-

 

 

 

59,500

 

VSP Holdings

 

5/25/2017

 

5/24/2018

 

 

12 %

 

Variable

 

 

100,000

 

 

 

-

 

Zoom Companies

 

11/8/2016

 

11/8/2017

 

 

8 %

 

Variable

 

 

-

 

 

 

20,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

723,235

 

 

 

289,000

 

 

 

 

 

 

Debt discount

 

 

 

 

 

(290,082 )

 

 

(173,523 )

 

 

 

 

 

 

Notes payable, net of discount

 

 

 

 

$ 433,153

 

 

$ 115,477

 

 

During the nine months ended September 30, 2017, the Company received proceeds from new convertible notes of $813,000, incurred penalties of $24,500, reclassified $7,510 of accrued interest into convertible notes payable, and reclassified convertible promissory notes of $317,191 into new convertible notes payable. The Company recorded payment of their convertible notes of $44,250 in principal, $39,000 in interest and prepayment penalties, and conversions of $460,144 of convertible note principal and interest. All the Company’s convertible notes have a conversion rate that is variable or a conversion rate with a reset provision. Therefore, for those notes, the Company has accounted for their conversion features as derivative instruments (see Note 7). As a result of recording derivative liabilities at note inception, the Company increased the debt discount recorded on their convertible notes by $1,084,063 during the nine months ended September 30, 2017. The Company also recorded amortization of $984,605 on their convertible note debt discounts. As of September 30, 2017, the convertible notes payable are convertible into 13,456,656,575 shares of the Company’s common stock.

 

 
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During the nine months ended September 30, 2016, the Company received proceeds from new convertible notes of $397,000, and reclassified convertible promissory notes of $127,700 into new convertible notes payable. The Company recorded no payments on their convertible notes and conversions of $90,726 of convertible note principal and interest. Each of the Company’s convertible notes have a conversion rate that is variable or a conversion rate with a reset provision. Therefore, the Company has accounted for such conversion features as derivative instruments. As a result of recording derivative liabilities at note inception, the Company increased the debt discount recorded on their convertible notes by $397,000 during the nine months ended September 30,2016. The Company also recorded amortization of $197,100 on their convertible note debt discounts.

 

During the nine months ended September 30, 2017 and 2016, the Company recorded accrued interest expense of $52,383 and $11,721, respectively, on its convertible notes payable. As of September 30, 2017, the accrued interest balance was $39,570.

 

7. DERIVATIVE LIABILITIES

 

The following table represents the Company’s derivative liability activity for the embedded conversion features for the nine months ended September 30, 2017:

 

 

 

September 30,

 

 

 

2017

 

 

 

 

 

Balance, beginning of period

 

$ 405,929

 

Initial recognition of derivative liability

 

 

1,775,187

 

Conversion of derivative instruments to Common Stock

 

 

(1,404,024 )

Mark-to-Market adjustment to fair value

 

 

310,409

 

Balance, end of period

 

$ 1,087,501

 

 

During the nine months ended September 30, 2017 the Company recorded derivative liabilities for embedded conversion features related to convertible notes payable of $1,775,187, reduced derivative liabilities by $1,404,024 for convertible notes and accrued interest converted into common stock, and performed a final mark-to-market adjustment for the derivative liability related to the convertible notes and the carrying amount of the derivative liability related to the conversion feature and recognized a gain on the derivative liability valuation of $310,409.

 

The Company uses the Black-Scholes option pricing model to estimate fair value for those instruments convertible into common shares at inception, at conversion or extinguishment date, and at each reporting date. During the nine months ended September 30, 2017, the company used the following assumptions in their Black-Scholes model: (1) risk free interest rate 1.06% - 1.20%, (2) term of 0.27 years – .81 years, (3) expected stock volatility of 273% - 349%, (4) expected dividend rate of 0%, (5) common stock price of $0.0001 - $0.0006, and (6) exercise price of $0.00005 - $0.0004.

 

These instruments were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The instruments do not qualify for hedge accounting, and as such, all future changes in the fair value will be recognized in earnings until such time as the instruments are exercised, converted or expire. 

 

 
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8. RELATED PARTY TRANSACTIONS

 

Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial and operating decisions. A related party transaction is considered to be a transfer of resources or obligations between related parties, regardless of whether or not a price is charged.

 

The following entities have been identified as related parties:

 

Ira Morris

- President, secretary, treasurer and director

George Drazenovic

- Greater than 10% stockholder

Rancho Capital Management Inc.

- Greater than 10% stockholder

 

The following balances exist with related parties:

 

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Loan to related party

 

$ 163,471

 

 

$ 41,654

 

 

During the year ended December 31, 2015, the amount of $26,168 was advanced to the former President of the Company.

 

During the nine months ended September 30, 2017, the Company advanced Rancho Capital Management Inc. $125,817. A payment of $4,000 was made to the Company, for a total balance owed of $137,303.

 

Accrued expenses

 

$ 8,025

 

 

$ 63,900

 

 

On February 12, 2016, the Company entered into a Contractor Agreement with the President of the Company for management services for the period of one year. Pursuant to the agreement the President would receive a signing bonus of $50,000 and $5,000 per month beginning February 2016, to be paid in cash and stock, for services rendered plus reimbursement of the Company's expenses. As of September 30, 2017, the Company accrued fees totaling $110,000, of which $110,000 has been paid in cash and stock.

 

On February 1, 2017, the Company entered into a Contractor Agreement with the President of the Company for management services for the period of one year. Pursuant to the agreement the President would receive a signing bonus of $50,000 and $5,000 per month beginning February 2017, to be paid in cash and stock, for services rendered plus reimbursement of the Company's expenses. As of September 30, 2017, the Company accrued fees totaling $112,600, of which $104,575 has been paid in cash and stock.

 

Prepaid expenses

 

$ -

 

 

$ 118,787

 

 

During the year ended December 31, 2016, the Company entered into 3 contracts with Rancho Capital for consulting services for total payment of $420,000. As of September 30, 2017, $420,000 has been amortized to the statement of operations to consulting fees.

 

 
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The following transactions were carried out with related parties:

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

Contractors

 

$ 228,929

 

 

$ 250,330

 

 

During the nine months ended September 30, 2017 and 2016, the Company recorded $116,330 and $197,931, respectively, in contractor fees to Rancho Capital pursuant to the 3 contracts executed in 2016.

 

During the nine months ended September 30, 2017 and 2016, the company accrued fees of $112,600 and $52,399, respectively, pursuant to the contracts executed in 2016 and 2017, to Mr. Ira Morris for management services.

 

9. STOCKHOLDER’S EQUITY

 

Preferred Stock

 

On August 23, the Company authorized the establishment of Preferred Series B Shares with an authorized amount of 1,000 shares at a par value of $0.0001 and 100,000,000 votes per share. The Board of Directors of the Company filed with the State of Delaware accordingly.

 

Common Stock

 

On September 30, 2011, the Company issued 132,000,000 shares of common stock to the directors of the Company at a price of $0.00017 per share, for $22,000.

 

On September 10, 2012, the Company issued 19,872,000 free trading shares of common stock at $0.0025 per share to a total of 46 stockholders for consideration of $49,680.

 

On September 9, 2013, the Director then approved a sixty new, for one old share in a forward split of the Company's outstanding shares of common stock. All share and per share data in the accompanying financial statements and footnotes has been adjusted retrospectively for the effects of the stock split.

 

On September 9, 2013, the Company entered into a share cancellation/return to treasury agreement with Mr. George Drazenovic, the Company's president; wherein Mr. Drazenovic agreed to the cancellation and return to treasury of 108,000,000 shares of common stock of our company for $1.

 

On September 27, 2014, the Company initiated a private placement for the sale of 300,000 units at $0.5 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $1 per share and expire on January 1, 2017.

 

On July 22, 2015, the Company initiated a private placement for the sale of 50,000 units at $1 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $1.50 per share and expire on January 1, 2017.

 

 
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On August 13, 2015, the Company initiated a private placement for the sale of 27,027 units at $1.85 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $2.00 per share and expire on January 1, 2017.

 

On September 1, 2015, the Company initiated a private placement for the sale of 39,063 units at $1.28 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $1.50 per share and expire on January 1, 2017.

 

On October 1, 2015, the Company initiated a private placement for the sale of 103,000 units at $1.03 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $1.50 per share and expire on January 1, 2017.

 

On October 15, 2015, the Company initiated a private placement for the sale of 250,000 units at $1 per unit. Each unit comprised of 1 share of common stock with no warrants attached.

 

On August 1, 2016, the Company entered into a debt settlement agreement with Rancho Capital Management Inc. Pursuant to this agreement, the Company issued an aggregate of 50,000,000 common shares at a price of $0.001 to settle $50,000 owed on the Contractor agreement dated April 15, 2016.

 

During the year ended December 31, 2016, the holders of convertible notes converted a total of $254,837 of principal and interest into 49,525,831 shares of our common stock.

 

On May 9, 2017, the Company issued 24,000,000 shares of common stock at a price of $0.0008 to Ira Morris to satisfy unpaid contractor fees accrued in the amount of $19,200.

 

On June 12, 2017, the Company issued 34,133,333 shares of common stock at a price of $0.00075 to Ira Morris to satisfy unpaid contractor fees accrued in the amount of $25,600.

 

On June 12, 2017, the Company issued 34,133,333 shares of common stock at a price of $0.00075 to Ira Morris to satisfy unpaid contractor fees accrued in the amount of $25,600.

 

On August 21, 2017, the Company issued 48,000,000 shares of common stock at a price of $0.0002 to Ira Morris to satisfy unpaid contractor fees accrued in the amount of $9,600. The common stock was valued at $19,200 based on the market price of the Company’s common stock on the date of issuance, and $14,400 was recorded as a gain of settlement of debt.

 

On August 23, 2017, the Company voted to effectuate an increase in the authorized amount of common stock from 6,000,000,000 to 25,000,000,000.

 

During the nine months ended September 30, 2017, the holders of convertible notes converted a total of $509,126 of principal and interest into 2,585,855,722 shares of common stock.

 

As of September 30, 2017, 25,000,000,000 common shares, par value $0.0001, were authorized (6,000,000,000 shares as of December 31, 2016), of which 2,651,317,176 shares were issued and outstanding (145,163,921 shares as of December 31, 2016).

 

Treasury Stock

 

Retirement of Treasury Stock

 

On September 9, 2013, the Company retired 108,000,000 shares of common stock. These retired shares are now included in the Company’s pool of authorized but unissued shares.

 

 
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Warrants

 

The Company has reserved 519,090 shares of common stock as of December 31, 2016, for the exercise of warrants to non-employees, of which 519,090 are exercisable. These warrants could potentially dilute basic earnings per share in future years. The warrants exercise prices and expiration dates are as follows:

 

Exercise

 

 

Number

 

 

 

 

Price

 

 

of

 

 

Expiration

 

$

 

 

Shares

 

 

Date

 

 

1.5

 

 

 

103,000

 

 

January 1, 2017

 

 

1

 

 

 

300,000

 

 

January 1, 2017

 

 

1.5

 

 

 

39,063

 

 

January 1, 2017

 

 

2

 

 

 

27,027

 

 

January 1, 2017

 

 

1.5

 

 

 

50,000

 

 

January 1, 2017

 

 

 

 

 

 

519,090

 

 

 

 

 

As of September 30, 2017, the Company has no exercisable stock warrants.

 

10. INCOME TAXES

 

A reconciliation of income tax expense to the amount computed at the statutory rates is as follows:

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

Operating profit (loss) for the nine months ended September 30

 

$ (2,662,767 )

 

$ (183,938 )

Average statutory tax rate

 

 

34 %

 

 

34 %

Expected income tax provisions

 

$ (905,341 )

 

$ (62,539 )

Unrecognized tax gains (loses)

 

 

(905,341 )

 

 

(62,539 )

Income tax expense

 

$ -

 

 

$ -

 

 

The Company has net operating losses carried forward of approximately $4,626,173 for tax purposes which will expire in 2027 if not utilized beforehand.

 

 
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11. COMMITMENTS

 

On January 3, 2017, the Company entered into a Consulting Agreement with Makmo Trading Corp. (“Makmo”), to provide marketing services. The term of the Agreement is from January 3, 2017 to January 3, 2018 and Makmo will be compensated $4,167 per month for a total annual amount of $50,000. Makmo agreed to the acceptance of a convertible promissory note for the entire annual fee. (See Note 5)

 

On January 7, 2017, the Company entered into a Consulting Agreement with Blue Comet, LLC (“Blue Comet”), to provide consulting services related to business development and mergers and acquisitions. The term of the Agreement is from January 1, 2017 to December 31, 2017 and Blue Comet will be compensated $8,333 per month for a total annual amount of $100,000. Blue Comet agreed to the acceptance of a convertible promissory note for the entire annual fee. (See Note 5)

 

On February 1, 2017, the Company entered into a twelve-month contracting arrangement with Ira Morris. As compensation for services, the Company will pay the contractor fees of $5,000 a month, payable $3,400 in cash and $1,600 with common stock of the company valued at 50% of market at the date of conversion. The contractor was entitled to cash compensation of $50,000 upon signing.

 

On February 9, 2017, the Company terminated all contractor agreements with Rancho Capital Management Inc, and therefore, the contracted annual fees of $420,000 were not prepaid to the contractor.

 

On May 25, 2017, the Company entered into a Consulting Agreement with N&M Brands, LLC (“N&M), to provide internet application services. The term of the Agreement is from May 25, 2017 to May 24, 2018 and N&M will be compensated $8,333 per month for a total annual amount of $100,000. N&M agreed to the acceptance of a convertible promissory note for the entire annual fee. (See Note 5)

 

On May 25, 2017, the Company entered into a Consulting Agreement with VSP Holdings, LLC (“VSP”), to provide internet application services. The term of the Agreement is from May 25, 2017 to May 24, 2018 and VSP will be compensated $8,333 per month for a total annual amount of $100,000. VSP agreed to the acceptance of a convertible promissory note for the entire annual fee. (See Note 5)

 

On August 8, 2017, Black Stallion Oil and Gas, Inc. (the “Company”) entered into a Licensing Agreement with Active Lab International, Inc. (“Active Lab”), for the distribution rights of the products of Active Lab, which include Citrus Defence® and Synapset®.

 

12. SUBSEQUENT EVENTS

 

None.

 

 
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

 

FORWARD-LOOKING STATEMENTS

 

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

 

RESULTS OF OPERATIONS

 

Working Capital

 

 

 

September 30,
2017

 

 

December 31,
2016

 

Current Assets

 

$ 339,471

 

 

$ 160,441

 

Current Liabilities

 

 

1,584,380

 

 

 

618,816

 

Working Capital (Deficit)

 

$ (1,244,910 )

 

$ (458,375 )

 

Cash Flows

 

 

 

September 30,
2017

 

 

September 30,
2016

 

Cash Flows (used in) Operating Activities

 

$ (2,306,323 )

 

$ (697,640 )

Cash Flows (provided by) Investing Activities

 

 

0

 

 

 

0

 

Cash Flows (provided by) Financing Activities

 

 

2,309,032

 

 

 

706,717

 

Net Increase in Cash During Period

 

$ 2,709

 

 

$ 9,077

 

 

Results for the Three Months Ended September 30, 2017 Compared to the Three Months Ended September 30, 2016

 

Operating Revenues

 

The Company’s revenues for the three months ended September 30, 2017 and September 30, 2016 were $0 and $0, respectively.

 

 
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Operating Expenses

 

Operating expenses for the three months ended September 30, 2017, and September 30, 2016, were $132,387 and $172,849, respectively. Operating expenses consisted primarily of consulting fees. professional fees, general and administrative expenses and preparing reports and SEC filings relating to being a public company. The decrease was primarily attributable to a decrease in contractor and legal fees.

 

Net Loss from Operations

 

The Company’s net loss from operations for the three months ended September 30, 2017 and 2016 was $132,387 and $172,849, respectively. The decreased loss is due to a decrease in operating expenses.

 

Other Income (Expense) :

 

Other income (expense) for the three months ended September 30, 2017 and 2016 were $(246,891) and $(96,136) respectively. Other income (expense) consists of change of fair value on derivative valuation and interest expense associated with convertible debentures. The gain or loss on derivative valuation is directly attributable to the change in fair value of the derivative liability. Interest expense is primarily attributable the initial interest expense associated with the valuation of derivative instruments at issuance and the accretion of the convertible debentures over their respective terms. The increase is primarily resulted from the fluctuation of the Company’s stock price which impacted the valuation of the derivative liabilities and the change in the gain/loss on debt settlement between periods based on the amount of debt converted and the difference between the value of the stock issued and the debt extinguished.

 

Net Profit (Loss)

 

Net profit (loss) for the three months ended September 30, 2017 and 2016, was $(379,278) and $(268,985) respectively.

 

Results for the Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016

 

Operating Revenues

 

The Company’s revenues for the nine months ended September 30, 2017 and September 30, 2016 were $0 and $0, respectively.

 

Operating Expenses

 

Operating expenses for the nine months ended September 30, 2017, and September 30, 2016, were $555,280 and $365,256, respectively. Operating expenses consisted primarily of consulting fees. professional fees, general and administrative expenses and preparing reports and SEC filings relating to being a public company. The increase was primarily attributable to an increase in consulting and legal fees.

 

Net Loss from Operations

 

The Company’s net loss from operations for the nine months ended September 30, 2017 and 2016 was $550,280 and $365,256, respectively. The increased loss is due to an increase in operating expenses.

 

 
22
 
Table of Contents

 

Other Income (Expense) :

 

Other income (expense) for the nine months ended September 30, 2017 and 2016 were $(2,107,487) and $(183,938) respectively. Other income (expense) consists of change of fair value on derivative valuation and interest expense associated with convertible debentures. The gain or loss on derivative valuation is directly attributable to the change in fair value of the derivative liability. Interest expense is primarily attributable the initial interest expense associated with the valuation of derivative instruments at issuance and the accretion of the convertible debentures over their respective terms. The increase is primarily resulted from the fluctuation of the Company’s stock price which impacted the valuation of the derivative liabilities and the change in the gain/loss on debt settlement between periods based on the amount of debt converted and the difference between the value of the stock issued and the debt extinguished.

 

Net Profit (Loss)

 

Net profit (loss) for the nine months ended September 30, 2017 and 2016, was $(2,662,767) and $(549,194) respectively.

 

Liquidity and Capital Resources

 

As of September 30, 2017, the Company had a cash balance and asset total of $2,709 and $1,189,471 respectively, compared with $0 and $1,011,599 of cash and total assets, respectively, as of December 31, 2016. The increase in assets was due to an increase in loans from related parties and prepaid expenses.

 

As of September 30, 2017, the Company had total liabilities of $1,584,380 compared with $618,816 as of December 31, 2016. The increase in total liabilities was primarily attributed to the addition of promissory notes.

 

The overall working capital decreased from $(458,375) deficit at December 31, 2016 to $(1,244,910) at September 30, 2017.

 

Cash Flow from Operating Activities

 

During the nine months ended September 30, 2017, cash used in operating activities was $(2,306,323) compared to $(697,640) for the nine months ended September 30, 2016.

 

Cash Flow from Investing Activities

 

During the nine months ended September 30, 2017 cash used in investing activities was $0 compared to $0 for the nine months ended September 30, 2016.

 

Cash Flow from Financing Activities

 

During the nine months ended September 30, 2017, cash provided by financing activity was $2,309,032 compared to $706,717 for the nine months ended September 30, 2016.

 

Quarterly Developments

 

None.

 

 
23
 
Table of Contents

 

Subsequent Developments

 

None.

 

Going Concern

 

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

 

Future Financings

 

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Critical Accounting Policies

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

 
24
 
Table of Contents

 

Inflation

 

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

 

Recently Issued Accounting Pronouncements

 

The Company has reviewed recently issued accounting pronouncements and noted no pronouncements that would have a material impact on its results of operations or financial position.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a non-accelerated filer and a smaller reporting company, as defined in Rule 12b-2 of the of the Securities Exchange Act of 1934, and as such, are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our Company’s officers, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our Company’s officers, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses in our internal control over financial reporting identified in our Annual Report on Form 10-K for the year ended December 31, 2016, that was filed with the SEC on May 4, 2017, the Company’s officers concluded that our disclosure controls and procedures are ineffective.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act, during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
25
 
Table of Contents

 

PART II- OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM 1A. RISK FACTORS

 

Our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 includes a detailed discussion of our risk factors.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

1. Quarterly Issuances:

 

None.

 

2. Subsequent Issuances:

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

 
26
 
Table of Contents

 

ITEM 6. EXHIBITS

 

Exhibit Number

Description

-3

Articles of Incorporation and Bylaws

3.1

Articles of Incorporation (incorporated by reference to our Registration Statement on Form S-1 filed on March 20, 2012)

3.2

Bylaws (incorporated by reference to our Registration Statement on Form S-1 filed on March 20, 2012)

3.3

Certificate of Amendment (incorporated by reference to our Current Report on Form 8-K filed on September 20, 2013)

-10

Material Contracts

10.1

Share Cancellation to Treasury Agreement (incorporated by reference to our Current Report on Form 8-K filed on September 20, 2013)

10.2

Lease Assignment Agreement between our company and West Bakken Energy Holdings, Ltd. (incorporated by reference to our Current Report on Form 8-K filed on March 5, 2014)

10.3

Master Services Consulting Agreement dated September 16, 2015 (incorporated by reference to our Current Report on Form 8-K filed on September 21, 2015)

10.4

Contractor Agreement between our company and Rancho Capital Management Inc. dated February 9, 2016 (incorporated by reference to our Current Report on Form 8-K filed on August 30, 2016)

10.5

Contractor Agreement between our company and Rancho Capital Management Inc. dated April 8, 2016 (incorporated by reference to our Current Report on Form 8-K filed on August 30, 2016)

10.6

Debt Settlement Agreement between our company and Rancho Capital Management Inc. dated April 15, 2016 (incorporated by reference to our Current Report on Form 8-K filed on August 30, 2016)

10.7

Debt Settlement Agreement between our company and Rancho Capital Management Inc. dated August 1, 2016 (incorporated by reference to our Current Report on Form 8-K filed on August 30, 2016)

-31

Rule 13a-14 (d)/15d-14d) Certifications

31.1*

Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2001 of the Principal Executive Officer

31.2*

Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2001 of the Principal Financial Officer

-32

Section 1350 Certifications

32.1*

Section 906 Certification pursuant to the Sarbanes-Oxley Act of 2001 of the Principal Executive Office, Principal Financial Officer and Principal Accounting Officer

(101)*

Interactive Data File

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

 

 
27
 
Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

BLACK STALLION OIL AND GAS, INC.

(Registrant) 

 

Dated: November 17, 2017

By:

/s/ Ira Morris

 

Ira Morris

 

President, Secretary, Treasurer and Director

 

(Principal Executive Officer,
Principal Financial Officer and Principal Accounting Officer)

 

 

 

 

28

 

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