UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 | ||||||||||
FORM Amendment No. 1
| ||||||||||
| (Mark One) | ||||||||||
| [X] | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||||
| For the quarterly period ended | ||||||||||
| [ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT | |||||||||
For the transition period from _____
| ||||||||||
| Commission file number: | ||||||||||
| (Exact name of registrant as specified in its charter) | ||||||||||
| Colorado | 46-3289369 | |||||||||
| (State of Incorporation) | (IRS Employer ID Number) | |||||||||
| ||||||||||
| (Address of principal executive offices) | ||||||||||
| (Registrant's Telephone number) | ||||||||||
| (Former Address and phone of principal executive offices) | ||||||||||
Securities registered pursuant to Section 12(b) of the Act: None
| 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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. | |||||||||
| Yes | [ | No | [ | ||||||
| Indicate by check mark whether the registrant has submitted electronically | |||||||||
| Yes | [x] | No | [ ] | ||||||
| Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, | |||||||||
| Large accelerated filer | [ ] | Accelerated filer | [ ] | ||||||
| Non-accelerated filer | [ | Smaller reporting company | [x] | ||||||
| Emerging growth company | [x] | ||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] | |||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes | [_] | No | [x] |
Indicate the number of share outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
As of March 4, 2019,April 17, 2020 there were 136,965,896239,062,949 shares of the registrant’s common stock issued and outstanding.
EXPLANATORY NOTE
This Amendment No. 1 to the Quarterly Report on Form 10-Q/A (the "Amendment") amends the Quarterly Report on Form 10-Q of Canna Corporation for the period ended March 31, 2019 (the "Original Filing"), that was originally filed with the U.S. Securities and Exchange Commission on June 26, 2019.
The Amendment is being filed to correct entries in the Original Filing pertaining to the sale and transfer to third parties on March 14, 2019 of certain convertible promissory notes, originally issued to Eagle Equities, LLC, on August 10, 2018 in the amounts of $300,000 and $100,000. As detailed in Note 4 to the accompanying financial statements, certain provisions of the sale and transfer of the notes resulted in material increases in the note balances and the net present value of the Company’s cash flow obligations thereto, thus triggering debt extinguishment accounting pursuant to ASC 470-50,“Debt - Modifications and Extiguishments.” The impact of the effective extinguishment and reissuance of the debt on not only the principal of the notes, but the related interest, derivative liabilities, and disclosures, is reflected in the Amendment. In addition, $51 originally reported as current assets was charged to expense.
Additionally, the Restated Subsequent Events section of Note 4 includes details pertaining to the sale of the Company’s subsidiary and the Company’s acquisition of another company. These items do not affect the financial statement reporting in the Original Filing, as the events giving rise to these items took place after the Original Filing, but prior the the issuance of the Amendment. As such, only additional disclosure concerning these events has been provided.
Except as described above, the Amendment does not modify any other disclosures presented in, or exhibits to, the Original Filing in any way.
| PART I – FINANCIAL INFORMATION |
| Item 1. Financial Statements |
| 1 |
| Canna Corporation |
| Condensed Consolidated Balance Sheets |
| (Unaudited) |
| March 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| (Restated) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 1,756 | $ | 183,347 | ||||
| Total current assets | 1,756 | 183,347 | ||||||
| Fixed Assets | ||||||||
| Property and equipment, net | 1,483,830 | 1,408,490 | ||||||
| Other Assets | ||||||||
| Cryptocurrency | — | 6,189 | ||||||
| Total assets | $ | 1,485,586 | $ | 1,598,026 | ||||
| LIABILITES AND SHAREHOLDERS' DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 512,185 | $ | 58,628 | ||||
| Bank overdraft | 9,166 | 27,793 | ||||||
| Accrued expenses | 5,080 | 5,080 | ||||||
| Accrued interest | 7,963 | 28,595 | ||||||
| Accrued interest - related party | 17,644 | 14,798 | ||||||
| Payroll liabilities | 7,519 | 7,707 | ||||||
| Derivative liability | 2,045,801 | 2,296,080 | ||||||
| Convertible notes payable, net of discounts of $539,393 and $418,314 | 104,689 | 291,686 | ||||||
| Convertible notes payable - related party, net of discounts of $0 and $12,126 | 57,154 | 45,028 | ||||||
| Related party loans | 416,024 | 360,528 | ||||||
| Current portion of auto loan | 8,239 | 9,933 | ||||||
| Loans payable - net of discounts $ 52,579 and $180,085 | 1,387,902 | 1,010,714 | ||||||
| Deferred revenue | 255,362 | 275,362 | ||||||
| Total current liabilities | 4,834,728 | 4,431,932 | ||||||
| Long term liabilities | ||||||||
| Auto loans, net of current portion | 36,017 | 36,017 | ||||||
| Total long term liabilities | 36,017 | 36,017 | ||||||
| Total liabilities | 4,870,745 | 4,467,949 | ||||||
| 2 |
| Commitments and Contingencies | ||||||||
| Contingency liabilities | 83,000 | 83,000 | ||||||
| Mezzanine Equity | ||||||||
| Series A Convertible Preferred stock: $0.0001 par value: 1,000,000 shares authorized:803,000 and 953,000 shares issued and outstanding at March 31, 2019 and at December 31, 2018 respectively | 105,300 | 120,300 | ||||||
| Shareholders’ Deficit | ||||||||
| Preferred stock other designations: $0.0001 par value: 10,000,000 shares authorized: 0 and 0 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | — | — | ||||||
| Common stock: $0.0001 par value: 350,000,000 shares authorized:226,965,896 and 59,803,654 shares issued and outstanding at March 31, 2019 and December 31, 2018 respectively | 22,696 | 5,980 | ||||||
| Additional paid-in capital | 2,713,159 | 1,131,837 | ||||||
| Accumulated deficit | (5,581,730 | ) | (3,905,831 | ) | ||||
| Total Canna Corporation shareholders' deficit | (2,845,875 | ) | (2,768,014 | ) | ||||
| Non-controlling interest | (727,584 | ) | (305,209 | ) | ||||
| Total shareholders’ deficit | (3,573,459 | ) | (3,073,223 | ) | ||||
| Total liabilities and shareholders’ deficit | $ | 1,485,586 | $ | 1,598,026 | ||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 3 |
See accompanying notes to the unaudited condensed consolidated financial statements.
| 4 |
See accompanying notes to the unaudited condensed consolidated financial statements.
| 5 |
| Commitments and Contingencies | ||||||||
| Shareholders’ equity (deficit) | ||||||||
| Series A Convertible Preferred stock: $0.0001 par value: 1,000,000 shares authorized: 953,000 and 1,000,000 shares issued and outstanding at September 30, 2018 and at December 31, 2017 respectively | 95 | 100 | ||||||
| Non-Controlling interest | (179,126 | ) | — | |||||
| Preferred stock other designations: $0.0001 par value: 10,000,000 shares authorized: 0 and 0 shares issued and outstanding at September 30, 2018 and December 31,2017 respectively | — | — | ||||||
| Common stock: $0.0001 par value: 100,000,000 shares authorized:59,303,654 and 3,915,769 shares issued and outstanding at September 30, 2018 and December 31, 2017 respectively | 5,930 | 392 | ||||||
| Additional paid-in capital | 1,130,642 | 730,515 | ||||||
| Accumulated deficit | (2,812,030 | ) | (5,222,959 | ) | ||||
| Total shareholders’ equity (deficit) | (1,854,489 | ) | (4,491,952 | ) | ||||
| Total liabilities and shareholders’ equity (deficit) | $ | 1,995,486 | $ | 4,998 | ||||
See accompanying notes to the condensed consolidated unaudited financial statements.
| 6 |
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Issuance of shares of common stock for conversion of debt | $ | 1,583,038 | $ | 47,347 | ||||
| Issuance of shares of common stock for conversion of preferred stock | $ | 15,000 | $ | 3,700 | ||||
| Derivative liabilities recognized as debt discounts | $ | 722,190 | $ | — | ||||
| Loan payable paid by related party | $ | — | $ | 29,600 | ||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Cash paid for income taxes | $ | — | $ | — | ||||
| Cash paid for interest | $ | — | $ | — |
See accompanying notes to the unaudited condensed consolidated unaudited financial statements.
| 7 |
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash paid for asset acquisitions | (633,567 | ) | — | |||||
| Net cash used in investing activities - continuing operations | (633,567 | ) | — | |||||
| Net cash used in investing activities - discontinued operations | — | — | ||||||
| Net cash used in investing activities | (633,567 | ) | — | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from related party loans | 344,401 | — | ||||||
| Repayment of related party loans | (18,874 | ) | — | |||||
| Proceeds from convertible debt | 676,500 | 192,500 | ||||||
| Net cash provided by financing activities - continuing operations | 1,002,027 | 192,500 | ||||||
| Net cash provided by financing activities - discontinued operations | — | 53,790 | ||||||
| Net Cash provided by financing activities | 1,002,027 | 246,290 | ||||||
| NET CHANGE IN CASH | 235,843 | (4,260 | ) | |||||
| Cash, beginning of period | — | 4,260 | ||||||
| Cash, end of period | $ | 235,843 | $ | — | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Issuance of shares of common stock for convertible debt | $ | 407,985 | $ | — | ||||
| Issuance of shares of common stock for conversion of preferred stock | $ | 4,700 | $ | — | ||||
| Cancellation of common shares | $ | 2,340 | $ | — | ||||
| Loans issued to acquire fixed assets | $ | 843,705 | $ | — | ||||
| Derivative liabilities recognized as debt discount | $ | 716,500 | $ | — | ||||
| Replacement of convertible note to convertible note - related parties | $ | 74,084 | $ | — | ||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Cash paid for income taxes | $ | — | $ | — | ||||
| Cash paid for interest | $ | — | $ | — | ||||
See accompanying notesNotes to the condensed consolidated unaudited financial statements.
Notes to theRestated Condensed Consolidated Financial Statements
September 30, 2018 March 31, 2019
(Unaudited)
NOTE l: NATURE OF ORGANIZATION
Mining Power Group, Inc. formerly known as Rich Cigars, Inc.Canna Corporation (the "Company") was initially a Florida Corporation incorporated on July 29, 2013, and was established to manufacture and distribute high-quality, hand rolled,hand-rolled , premium cigars under the Rich Cigars brand name. The Company had branded custom cigars to be sold via the internet and through retail locations. The Company's primary operations are currently through Northway Mining, LLC (a New York limited liability corporation) as a data center for third parties’ cryptomining processes located in New York State, in which the Company has a majority interest (55%) acquired on August 1, 2018. Management intends to conduct our business principally in the U.S.
Northway Mining, LLC’s (“NWM”), core business is providing hosting and security services for third parties’ cryptomining processes. These third parties offer security servicesprocesses, including continuous camera recording, night-vision, motion activation, and automatic text notification to onsite staff.
In November 2017, the Company underwent a change in control and became a Colorado corporation. As a result of this change, the Company changed the business name to Intercontinental Technology, Inc. in order to reflect a change in the Company's direction and overall strategy. The Company's strategic direction was to focus on the acquisition, development, and marketing of proprietary patented products that are readily marketable internationally, and at the same time, enterentering the business of cryptocurrency mining by the ownership of multiple cryptocurrency mining machines.
On December 26, 2017, the Company completed a reorganization. Rich Cigars, Inc., having been renamed to RCGR SUB, Inc., became a direct, wholly-owned subsidiary of a newly-formednewly formed Delaware corporation, First Intercontinental Technology, Inc., which. First Intercontinental Technology, Inc. was then considered the parent and is now the public entity. Additionally, another Delaware corporation was formed, Intercontinental Services, Inc. As of the effective date of the reorganization,merger, all outstanding shares of common stock and preferred stock of Rich Cigars, Inc. were automatically converted into identical shares of common stock or preferred stock in the parent on a one-for-one basis.
On February 16, 2018, the Company's Board of Directors voted to annul and vitiate the series of transactions in Delaware by filing certificates of correction with Delaware's Secretary of State. As a result, Intercontinental Technology, Inc. and First Intercontinental Technology, Inc. were dissolved and all ownership reverted back to equity shares in RCGR SUB, Inc. On February 21, 2018, the Company amended and restated itsthe Articles of Incorporationincorporation in order to change the Company's name from RCGR SUB, Inc. to Mining Power Group, Inc.
On April 4, 2019, the Company effected a name change in the State of Colorado from Mining Power Group, Inc. to “Canna Corporation” in preparation for a refocus of its business plan. Similarly, the name change was filed in the State of Florida, where the Company’s headquarters are located.
NOTE 2: GOING CONCERN
These condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the foreseeable future. As of September 30, 2018,March 31, 2019, the Company has an accumulated deficit of $ 2,812,030$5,581,732 since inception. This raises substantial doubt about the Company's ability to continue as a going concern.
Management's plans include raising capital through the equity markets to fund operations and eventually generate revenue through its business; however, there can be no assurance that the Company will be successful in such activities. These condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classifications of the liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3: DISCONTINUED OPERATIONS
On November 27, 2017, the Company entered into a Subscription Agreement with Mr. Dror Svorai, the current CEO of the Company, for the purchase of 1,000,000 shares of restricted Series A Convertible Preferred Supermajority
voting stock. Pursuant to this agreement, the Company announced a shift in the strategic focus by which the Company has recognized a cessation of it business operations of Rich Cigars in accordance with Accounting Standards Codification (ASC) 205-20Discontinued Operations. As such, the historical results of the Company have been classified as discontinued operations. As of the year ended December 31, 2017, assets of discontinued operations consisted of property and equipment of $498. As of the period ended September 30, 2018 all property and equipment was written off.
Results of the discontinued operations for the nine months ended September 30, 2018 and 2017 are as follows:
| Three Months Ended September 30, 2018 | Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2018 | Nine Months Ended September 30, 2017 | |||||||||||||
| REVENUES | $ | — | $ | — | $ | — | $ | 4,606 | ||||||||
| COST OF SALES | — | — | — | 2,382 | ||||||||||||
| GROSS PROFIT | — | — | — | 2,224 | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Amortization Expense | — | 425 | — | 1,275 | ||||||||||||
| Depreciation Expenses | — | 106 | — | 320 | ||||||||||||
| Marketing Expense | — | — | — | 32,095 | ||||||||||||
| Other General and Administrative | — | 46,446 | — | 283,109 | ||||||||||||
| Total operating income (expenses) | — | 46,977 | — | 316,799 | ||||||||||||
| Income (loss) from operations | $ | — | $ | (46,977 | ) | $ | — | $ | (314,575 | ) | ||||||
| Nine Months Ended September 30, 2018 | Nine Months Ended September 30, 2017 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Loss from operations | $ | — | $ | (314,575 | ) | |||
| Adjustments to reconcile net loss to net cash | ||||||||
| Depreciation and Amortization | — | 1,595 | ||||||
| Stock issued for services | — | 20,000 | ||||||
| Change in assets and liabilities: | ||||||||
| Prepaid expenses | — | (7,861 | ) | |||||
| Inventory | — | 13,338 | ||||||
| Accounts payable and accrued expenses | — | 45,821 | ||||||
| Net cash used in operating activities | $ | — | $ | (241,682 | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Shareholder Contributions | $ | — | $ | 53,790 | ||||
| Net cash used in financing activities | $ | — | $ | 53,790 | ||||
NOTE 4:3: SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
Principles of Consolidation
The accompanying consolidated financial statements of Canna Corporation include its majority-owned subsidiary Northway Mining, Power Group, Inc. (formerly Rich Cigars, Inc.) includesLLC. All significant intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements include the accounts of Mining Power GroupCanna Corporation and its subsidiary Northway Mining, LLC, which isare controlled and owned 55% by Mining Power Group, Inc.Canna Corporation.
All of the equity interests in Northway Mining not held by the Company are reflected as non-controlling interests. In the consolidated statements of operations, we allocate net income (loss) attributable to non-controlling interests to arrive at net income (loss) attributable to the Company.
Reclassification
Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations. This change in classification does not materially affect previously reported cash flows from operations or from financing activities in the Statement of Cash Flows and had no effect on the previously reported Statement of Operations for any period. Currently, the Company presents the convertible Series A preferred stock as part of permanent equity instead of the mezzanine section of the balance sheet.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles ("GAAP")accounting principles generally accepted in the United States of America. America for interim financial statements and with the instructions to Form 10-Q and Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.
In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments (which includenecessary (consisting only of normal recurring adjustments) necessaryaccruals) to present fairly the financial position of the Company as of March 31, 2019 and the results of operations and cash flows have been made for the periods ended September 30, 2018 and 2017. Certain information and footnote disclosures normally included in financial statements are prepared in accordance with U.S. generally accepted accounting principles. The Company suggests these condensed financial statements be read in conjunction with the December 31, 2017 audited financial statements and notes thereto included in the Company's Form 10-K.presented. The results of operations for the periodthree months ended September 30, 2018March 31, 2019 are not necessarily indicative of the operating results for the full year.fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on June 17, 2019.
The Company has elected a December 31 fiscal year-end.
Use of Estimates
The preparation of consolidated financial statements in conformity with Generally Accepted Accounting Principles (" GAAP ") in the United States of America requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements.
Carrying Value, Recoverability and Impairment of Long-Lived Assets
The Company’s long-lived assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Cash and Cash Equivalents
The Company considers all investments with a maturity date of three months or less when purchased to be cash equivalents. The Company had cash in the amount of $235,843$1,756 and $0 at September 30, 2018$183,347 as of March 31, 2019 and December 31, 2017,2018, respectively.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer-specificcustomer specific facts and general economic conditions that may affect a client’s ability to pay.
economic conditions that may affect a client’s ability to pay.
Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company determines when receivables are past due or delinquent based on how recently payments have been received. The Company set up an allowance for doubtfulhas net $0 in accounts receivable at March 31, 2019 and recorded $57,246 as bad debt expense.
December 31, 2018 .
Cryptocurrencies
The Company receives cryptocurrencies from its customers as a form of payment and converts them into cash in less than 3 months from receipt. The Company accounts for its cryptocurrencies as indefinite-lived intangible assets at historical losscost less impairment in accordance with ASC 350Intangibles - Goodwill and Other. AsOther. During the three months ended March 31, 2019 and 2018, the Company recorded impairment losses of September 30, 2018$6,189 and $0, respectively, resulting in cryptocurrency balances of $0 and $6,189 as of March 31, 2019 and December 31, 2017, the fair value of cryptocurrencies was $239,016 and $0, respectively, which resulted in impairment loss of $26,028 and $0 for the nine months ended September 30, 2018, and 2017, respectively.
Property and Equipment
Property and equipment is recorded at cost. Expenditures for major additions and betterments are capitalized.
Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values shown in the table below) over the estimated useful lives of the respective assets.
| Fixed Asset | Estimated Useful Life (Years) | |||
| Building | 39 | |||
| Improvements | 5 | |||
| Furniture and office equipment | 5 | |||
| Computer Equipment | 5 | |||
| Vehicles | ||||
| 5 | ||||
Upon the sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations. During the three months ended March 31, 2019 and 2018, the Company purchased $103,805 and $0, respectively, of fixed assets, wrote off $0 and $498, respectively, of fixed assets, and recorded $28,465 and $0, respectively, of depreciation expense, resulting in net fixed assets of $1,483,830 and $1,408,490 at March 31, 2019 and December 31, 2018, respectively, as follows:
| Description | Total Acquisition Cost | Span of Life (years) | Depreciation Expense | Total Acquisition Cost | Span of Life (years) | Accumulated Depreciation December 31, 2018 | Depreciation 2019 Q1 | Net Value March 31, 2019 | ||||||||||||||||||||||||
| Computer Equipment | $ | 8,840 | 5 | $ | 543 | $ | 436 | $ | 7,861 | |||||||||||||||||||||||
| Improvements | 184,167 | 5 | 11,676 | 9,082 | 163,409 | |||||||||||||||||||||||||||
| Office Equipment & Furniture | 2,399 | 5 | 90 | 118 | 2,191 | |||||||||||||||||||||||||||
| Pods | 95,046 | 5 | 5,289 | 4,687 | 85,070 | |||||||||||||||||||||||||||
| Real Estate - Land | $ | 102,218 | — | $ | — | 102,218 | — | — | — | 102,218 | ||||||||||||||||||||||
| Real Estate - Building | 982,682 | 39 | 424 | 982,682 | 39 | 968 | 6,203 | 975,511 | ||||||||||||||||||||||||
| Vehicle | 56,435 | 5 | 4,731 | 2,783 | 48,921 | |||||||||||||||||||||||||||
| Sub-Total | 1,431,787 | 23,297 | 23,309 | 1,385,181 | ||||||||||||||||||||||||||||
| Assets Acquisitions 2019 Q1 | ||||||||||||||||||||||||||||||||
| Computer Equipment | 150 | 5 | — | 44 | 106 | |||||||||||||||||||||||||||
| Improvements | 171,382 | 5 | 2,907 | 12,222 | 5 | — | 603 | 11,619 | ||||||||||||||||||||||||
| Office Equipment & Furnitures | 80,133 | 5 | 805 | |||||||||||||||||||||||||||||
| Computer Equipment | 8,840 | 5 | 97 | |||||||||||||||||||||||||||||
| Vehicles | 132,016 | 5 | 3,501 | |||||||||||||||||||||||||||||
| TOTAL: | $ | 1,477,271 | $ | 7,734 | ||||||||||||||||||||||||||||
| Office Equipment & Furniture | 483 | 5 | — | 24 | 459 | |||||||||||||||||||||||||||
| Pods | 90,950 | 5 | — | 4,485 | 86,465 | |||||||||||||||||||||||||||
| Total 2019 Q1 | 103,805 | — | 5,156 | 98,649 | ||||||||||||||||||||||||||||
| Grand Total | $ | 1,535,592 | $ | 23,297 | $ | 28,465 | $ | 1,483,830 | ||||||||||||||||||||||||
| 10 |
Deferred revenue
The Company recognizes revenue for subscription hosting service sales over the subscription period. Deferredperiod and deferred revenue is recorded for the portion of the subscription period subsequent to each reporting date, for which cash has already been received.date. As of September 30, 2018March 31, 2019 and December 31, 2017,2018, the amountbalances of deferred revenue was $599,238were $255,362 and $0, respectively.
Loans Payable
The Company within the acquisition of Northway Mining LLC in August 1, 2018, acquired also certain real estate and vehicles, the unpaid balances on the two propertiesareguaranteed by mortgages having basic payment terms and conditions as follows: 707 Flats Road payable after 180 days from August 15, 2018, no interest and 2 Flint Mine Road with a 12 months payment period, and a maturity date on September 1, 2019, 5% interest rate. The unpaid balances on vehicles are guaranteed with a lien 72 month maturity since August 24, 2018 and October 5, 2018$275,362, respectively. The amountreduction of mortgages as of September 30, 2018 is $714,900 which is payable over$20,000 was due to a twelve month period. The debt on vehicles is deferred as follows: (a) $42,223 payable within a 12-month period following September 30, 2018 (current portion), and (b) $86,582 payable during 2020 through 2023 (non-current portion), as detailed in the following chart. These loans have a lien on the vehicles, and the interest rate for Community Bank is 5.79% and 1st Bank of Scotia is 7.29%.
| LENDER | CURRENT LIABILITIES | LONG TERM LIABILITIES | TOTAL DEBT | |||||||||||||||||||||||||
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |||||||||||||||||||||||
| Community Bank | $ | 13,656 | $ | 14,366 | $ | 13,656 | $ | 13,656 | $ | 13,656 | $ | 13,657 | $ | 82,648 | ||||||||||||||
| 1st Scotia Bank | 6,920 | 7,280 | 7,989 | 7,989 | 7,989 | 7,989 | 46,157 | |||||||||||||||||||||
| 707 Flats Rd. | — | 134,900 | — | — | — | — | 134,900 | |||||||||||||||||||||
| Marsan Properties | 97,500 | 482,500 | — | — | — | — | 580,000 | |||||||||||||||||||||
| Total: | $ | 118,077 | $ | 639,046 | $ | 21,645 | $ | 21,645 | $ | 21,645 | $ | 21,646 | $ | 843,705 | ||||||||||||||
payment made to against one customer’s deposit.
Beneficial Conversion Feature
If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature ("BCF"). A Beneficial Conversion FeatureBCF is recorded by the Company as a debt discount pursuant to ASC 470-20Debt with Conversion and Other Options.In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt under ASC 815Derivatives and Hedging to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20Debt with Conversion and Other Optionsfor consideration of any beneficial conversion features.
Derivative Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black ScholesBlack-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and, further, if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black Scholes option-pricing model.
Fair Value of Financial Instruments
Fair value is defined 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, based on our principal or, in the absence of a principal, most advantageous market for the specific asset or liability.
U.S. generally accepted accounting principles provide for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:
Level 1: Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including:
● quoted prices for similar assets or liabilities in active markets;
● quoted prices for identical or similar assets or liabilities in markets that are not active;
● inputs other than quoted prices that are observable for the asset or liability; and
| 11 |
● inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3: Inputs that are unobservable and reflect management’s own assumptions about the inputs market participants would use in pricing the asset or liability based on the best information available in the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected cash flows).
Our financial instruments consist of cash, accounts receivable, accounts payable, and debt. We have determined that the book value of our outstanding financial instruments as of September 30, 2018March 31, 2019 and December 31, 2017,2018, approximates the fair value due to their short-term nature.
Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of September 30, 2018:December 31, 2018 and March 31, 2019:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||
| September 30, 2018 | December 31, 2017 | |||||||||||||||||||
| Derivative Liabilities | $ | — | $ | — | $ | 1,862,832 | $ | 1,862,832 | $ | 4,454,993 | ||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Derivative Liability | ||||||||||||||||
| December 31, 2018 | $ | — | $ | — | $ | 2,296,080 | $ | 2,296,080 | ||||||||
| March 31, 2019 (Restated) | $ | 2,045,801 | $ | 2,045,801 | ||||||||||||
The Company reflects the fair value of derivativefor liabilities using the Black Scholes pricing model. The following chart arediscloses the estimated fair values for the Company’s derivative financial instruments and based on the parameters disclosed in our Notes 5 and 6 hereto:
| Lenders | September 30, 2018 | December 31, 2017 | ||||||
| Power Up Lending Group, Ltd | $ | 6,261 | $ | 553,851 | ||||
| Power Up Lending Group, Ltd [2] | $ | — | $ | 353,071 | ||||
| Crown Bridge Partners, LLC | $ | — | $ | 1,679,176 | ||||
| Kodiak Capital Group, LLC | $ | — | $ | 680,625 | ||||
| D&D Capital, Inc | $ | 20,817 | $ | — | ||||
| S&E Capital, Inc | $ | 117,050 | $ | — | ||||
| Firstfire Global Opportunities Funds, LLC | $ | 390,009 | $ | — | ||||
| Eagle Equities | $ | 1,328,695 | $ | 1,188,270 | ||||
| Total | $ | 1,862,832 | $ | 4,454,993 | ||||
| Derivative Liability Reconciliation | March 31, 2019 | December 31, 2018 | ||||||
| (Restated) | ||||||||
| Balance beginning of the period | $ | 2,296,080 | $ | 4,454,993 | ||||
| Derivative liability additions associated with convertible debt | 1,988,523 | 5,840,449 | ||||||
| Derivative liability reductions due to conversions or settlement of underlying debt | (1,287,038 | ) | 560,945 | |||||
| Change in fair value | (951,764 | ) | (8,560,307 | ) | ||||
| Ending Balance | $ | 2,045,801 | $ | 2,296,080 | ||||
Revenue Recognition
Effective January 1, 2018, the Company adopted the Financial Accounting Standards Board (“FASB”) standard update ASU 2014-09,Revenue “Revenue from Contracts with Customers,” (“Topic 606”) which provides a principles-based, five-step approach to measure and recognize revenue from contracts with customers. Revenue is recognized when the following criteria are met:
| ● | Identification of the contract, or contracts, with a customer; | |
| ● | Identification of the performance obligations in the contract; | |
| ● | Determination of the transaction price; | |
| ● | Allocation of the transaction price to the performance obligations in the contract; and | |
| ● | Recognition of revenue when, or as, we satisfy performance |
The adoption of this guidance did not have a material impact on the Company’s consolidated statementstatements of operations, cash flows, andshareholders’ equity (deficit), or balance sheetsheets as of the adoption date or for the nine months ended September 30, 2018 or 2017.date.
The Company's revenues have been generated primarily through hosting services to third parties. The terms of these agreements generally consist ofon a deposit and monthly billing cycles covering our services.
| 12 |
For the ninethree months ended September 30, 2018,March 31, 2019, all agreements met the above criteria or in exceptional cases only our involvement was to sell to some of the end users at pricing that is consistent with market transactions, thereby allowing for the recognition of revenue for the revenue on such transactions upon receipt.
We periodically review for any expected period of substantial involvement under the agreements that provide for non-refundable up-front payments and fees. If applicable, we will adjust the amortization periods when appropriate to reflect changes in assumptions relating to the duration of our expected involvement.
Revenue is recognized in the month the service (mostly hosting) is provided. Deferred Revenues on the Company’s balance sheet reflects the part of invoiced services (mostly hosting) that will be provided after September 30, 2018 for which cash payments have been received.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Additionally, the recognition of future tax benefits, such as net operating loss carryforwards, is required to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are determined using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.
In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company's assets and liabilities result in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some or all of the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies.
The Company files income tax returns in the United States, New York and Florida, States, which are subject to examination by the tax authorities in these jurisdictions. Generally, the statute of limitations related to the Company's federal and state income tax return is three years. The state impact of any federal changes for prior years remains subject to examination for a period up to five years after formal notification to the states.
Management has evaluated tax positions in accordance with ASC 740,Income Taxes,and has not identified any significant tax positions, other than those disclosed. All of the Company's tax years since inception remain subject to examination by Federal and State jurisdictions.
Earnings Per Share
Basic net income per common share("Basic EPS'')excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per common share("Diluted EPS'')reflects the potential dilution that could occur if stock options or other contracts to issue shares of common stock were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net income per common share.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Numerator | ||||||||||||||||
| Net income (loss) applicable to common shareholders | $ | (936,853 | ) | $ | (436,295 | ) | $ | 2,410,929 | $ | (785,770 | ) | |||||
| Denominator | ||||||||||||||||
| Weighted average common shares outstanding, basic | 55,215,525 | 2,789,067 | 41,328,152 | 2,722,751 | ||||||||||||
| Convertible preferred stock | 953,000,000 | — | 953,000,000 | — | ||||||||||||
| Convertible promissory notes | 8,738,824 | — | 8,738,824 | — | ||||||||||||
| Weighted average common shares outstanding, diluted | 1,016,954,348 | 2,789,067 | 1,003,066,976 | 2,722,751 | ||||||||||||
| Net Income per share - Basic | $ | (0.02 | ) | $ | (0.16 | ) | $ | 0.06 | $ | (0.29 | ) | |||||
| Net Income per shares - Diluted | $ | (0.02 | ) | $ | (0.16 | ) | $ | 0.00 | $ | (0.29 | ) | |||||
| 13 |
| Three Months Ended March 31 | ||||||||||||||||
| Unaudited & Filed 2019 | Adjustment 2019 | Unaudited & Restated 2019 | Unaudited & Filed 2018 | |||||||||||||
| Numerator | ||||||||||||||||
| Net income (loss) applicable to common shareholders | $ | (1,396,731 | ) | $ | (701,545 | ) | $ | (2,098,276 | ) | $ | 3,989,500 | |||||
| Denominator | ||||||||||||||||
| Weighted average common shares outstanding, basic | 124,136,135 | — | 124,136,135 | 24,817,133 | ||||||||||||
| Convertible preferred stock | 803,000,000 | — | 803,000,000 | 963,000,000 | ||||||||||||
| Convertible promissory notes | 16,971,487 | 8,914,069 | 25,885,556 | 3,516,203 | ||||||||||||
| Weighted average common shares outstanding, diluted | 944,107,622 | 8,914,069 | 953,021,691 | 991,333,336 | ||||||||||||
| Net Income per share - Basic | $ | (0.01 | ) | $ | — | $ | (0.01 | ) | $ | 0.16 | ||||||
| Income per shares - Diluted | $ | (0.01 | ) | $ | — | $ | (0.01 | ) | $ | 0.00 | ||||||
For the period ended March 31, 2019, the convertible instruments are anti-dilutive and therefore, have been excluded from earnings (loss) per share.
NOTE 5: CONVERTIBLE4: RESTATEMENT
This Amendment No. 1 to the Period Ended as of March 31, 2019, on this Form (the "Amendment") amends the Quarterly Report filed to theU.S. Securities and Exchange Commissionof Canna Corporation for the period ended March 31, 2019 (the "Original Filing"), that was originally filed with theU.S. Securities and Exchange Commissionon June 26, 2019.
The Amendment is being filed to correct entries in the Original Filing pertaining to the sale and transfer on March 14, 2019 of certain convertible promissory notes, originally issued to Eagle Equities, LLC on August 10, 2018 in the amount of $300,000 and $100,000. On March 14, 2019, Eagle Equities, LLC, declared default on the $300,000 and $100,000 notes resulting in interest and penalties equal to $142,884 and $47,198, respectively. All principal, accrued interest, and penalties were purchased by four investors and the Company recognized the new debts totaling $590,082. As a result, the Company determined this transaction should be accounted for as a debt extinguishment in accordance with ASC 470-50-40,“Debt - Modifications and Extinguishments,” in that the new principal amount adjusted the net present value of the notes’ remaining cash flows by an excess of 10% from the terms of the original notes. The $190,082 in additional principal, netted with settlement of existing accrued interest on the notes of $23,787, resulted in a loss on settlement of debt of $166,295.
The revised principal balances on these notes resulted in following adjustments;
Convertible notes
| Adjustment | ||||
| Settled notes | $ | (400,000 | ) | |
| Debt discount of settled notes | 144,657 | |||
| New assigned notes | 590,082 | |||
| Debt discount of new assigned notes | (522,759 | ) | ||
| $ | (188,020 | ) | ||
| 14 |
Accrued interest
| Adjustment | ||||
| Settled accrued interest | $ | (23,787 | ) | |
| Accrued interest from new assigned notes | 4,937 | |||
| $ | (18,850 | ) | ||
Interest expense and amortization of debt discount
| Adjustment | ||||
| Amortization of settled notes | $ | 144,657 | ||
| Amortization of new assigned notes | 67,323 | |||
| Interest expense from new assigned notes | 4,937 | |||
| $ | 216,917 | |||
Derivative liabilities
| Adjustment | ||||
| Derivative liabilities from settled notes | $ | (1,202,512 | ) | |
| Derivative liabilities from new assigned notes | 1,688,499 | |||
| $ | 485,987 | |||
Change in fair value of derivative
| Adjustment | ||||
| Gain on change in fair value of derivative from settled notes | $ | 1,202,512 | ||
| Loss on change in fair value of derivative from new assigned notes | (82,872 | ) | ||
| Day 1 loss from new assigned notes | (1,015,545 | ) | ||
| $ | 104,095 | |||
Also, $51 originally reported as other current assets was charged to expense.
Except as described above, the Amendment does not modify any other disclosures presented in, or exhibits to, the Original Filing in any way.
| March 31, 2019 (Unaudited as Filed) | March 31, 2019 (Adjustments) | March 31, 2019 (Unaudited and Restated) | ||||||||||
| Balance Sheet | ||||||||||||
| Other current assets | $ | 51 | $ | (51 | ) | $ | — | |||||
| Total assets | 1,485,637 | (51 | ) | 1,485,586 | ||||||||
| Accrued interest | 26,813 | (18,850 | ) | 7,963 | ||||||||
| Derivative liabilities | 1,559,814 | 485,987 | 2,045,801 | |||||||||
| Convertible notes payable | 292,709 | (188,020 | ) | 104,689 | ||||||||
| Total liabilities | 4,591,628 | 279,119 | 4,870,747 | |||||||||
| Accumulated deficit | (5,302,562 | ) | (279,168 | ) | (5,581,732 | ) | ||||||
| Total shareholders' deficit | $ | (2,566,707 | ) | $ | (279,168 | ) | $ | (2,845,877 | ) | |||
| 15 |
| March 31, 2019 (Unaudited as Filed) | March 31, 2019 (Adjustments) | March 31, 2019 (Unaudited and Restated) | ||||||||||
| Statements of Operations (Unaudited) | ||||||||||||
| General and administrative expense | $ | 103,161 | $ | 51 | $ | 103,212 | ||||||
| Total operating expenses | 131,626 | 51 | 131,677 | |||||||||
| Interest expense and amortization of debt discount | (804,507 | ) | (216,917 | ) | (1,021,424 | ) | ||||||
| Change in fair value of derivative liability | (418,664 | ) | 104,095 | (314,569 | ) | |||||||
| Loss on extinguishment of debt | (32,108 | ) | (166,295 | ) | (198,403 | ) | ||||||
| Total other expenses | (1,261,468 | ) | (279,117 | ) | (1,540,585 | ) | ||||||
| NET LOSS | $ | (1,819,106 | ) | $ | (279,168 | ) | $ | (2,098,274 | ) | |||
| March 31, 2019 (Unaudited as Filed) | March 31, 2019 (Adjustments) | March 31, 2019 (Unaudited and Restated) | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Net Loss | $ | (1,819,106 | ) | $ | (279,168 | ) | $ | (2,098,274 | ) | |||
| Adjustment to reconcile net income (loss) to net cash provided operating activities: | ||||||||||||
| (Gain) loss on extinguishment of debt | 32,108 | 166,295 | 198,403 | |||||||||
| Amortization of debt discount | 555,717 | 211,980 | 767,697 | |||||||||
| (Gain) loss in fair value of derivative | 418,664 | (104,095 | ) | 314,569 | ||||||||
| Write-off of other current asset | — | 51 | 51 | |||||||||
| Change in operating assets and liabilities: | ||||||||||||
| Accrued interest | 8,956 | 4,937 | 13,893 | |||||||||
| Net cash used in operating activities | $ | (95,805 | ) | $ | — | $ | (95,805 | ) | ||||
RESTATED SUBSEQUENT EVENTS
The Company has evaluated subsequent events that occurred from the date of the Original Filing through the date these financial statements were issued, and has determined there are additional subsequent events requiring disclosure as follows:
On July 1, 2019 the Company sold any and all interest of Northway Mining, LLC to Dror Svorai, under common control.
On January 16, 2020, the Company entered into an agreement (the "Acquisition Agreement"), to acquire the majority ownership interest of Agra Nutraceuticals Corporation ("Agra"), a Colorado corporation, having a registered business address of 67 SW 12th Ave, Ste 500, Deerfield Beach, Florida 33442. Pursuant to the Acquisition Agreement the Company acquires seventy-seven and one-half percent (77.5%) of the issued and outstanding shares of common stock of Agra to be transferred to it from the majority shareholder of Agra, SBS Eco Trust. In consideration of the acquisition of the Agra shares, Dror Svorai, the Registrant's majority shareholder, President, CEO and sole officer
| 16 |
and director transferred his 803,000 shares of the Registrant's Series A Preferred Stock and 197,000,000 shares of its common stock to SBS Eco.
In connection with the Acquisition Agreement, the Company underwent a change of control. As a result of the Acquisition, the SBS Eco Trust, whose trustee is Esther Bittelman, an individual, and Secretary of Agra, became controlling and majority shareholder of the Registrant (the "Change of Control").
As a result of entry into the Acquisition Agreement, Mr. Svorai resigned at the end of the business day on January 17, 2020, following the appointments and acceptances by the new officers and directors of the Company, Agra will be operated as a majority-owned subsidiary of the Company. The Acquisition will become effective 20 days following the mailing of an Information Statement to shareholders pursuant to Schedule 14.
There are a total of 1,000,000 shares designated as Series A Preferred Stock. Each share of Series A Preferred converts to 1,000 shares of common. Each share of the Series A Series A Preferred Stock has the voting rights equivalent of 20,000 shares of common stock (identical in every other respect to the voting rights of the holders of common stock entitled to vote at any regular or special meeting of the shareholders).
NOTE 5: NOTES PAYABLE
Convertible Notes Payable
Power Up Lending Group, LTD
On July 3, 2018,May 30, 2017, the Company entered into a potentially dilutive convertible noteadvance with Eagle Equities LLC.Power Up Lending Group, LTD. The advance, with a face value of $100,000, bears$38,000, bore interest at 8%12% per annum and iswas payable on July 3, 2019.March 5, 2018. The note was issued at a 7% discount, resulting in net proceeds received after issuance costs and fees was $96,500. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and original issue discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument.$35,000. Additionally, the note iswas convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 60% multiplied by the lowest price of the common shares for the 15 day trading period prior to which the Notice of Conversion iswas received. InDuring the eventyear ended December 31, 2018, the Company experiences a DTC Chill on its shares, the Conversion Price shall be decreased to 50% insteadnoteholder converted $50,858 of 60% while that chill isprincipal and interest into common stock, resulting in effect, DTC Chill is a limitation$0 and $2,387 in principal and interest as of certain services available for a security on deposit at the Depository Trust Company (DTC). A chill is a restriction placed by DTC on one or more of DTC’s services, such as limiting a DTC participant’s ability to make a deposit or withdrawalMarch 31, 2019 and December 31, 2018, respectively. The value of the security at DTC. A chill may remain imposed on a security for just a few days or for an extended period of time depending uponconversion feature was assigned to the reasons for the chill and whether the issuer or transfer agent corrects the problem.If the Company fails to maintain the share reserve at the 4x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%. The conversion formula created an embedded derivative conversion feature.
liability. The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of September 30, 2018:March 31, 2019: dividend yield of zero, 2770 days term to maturity, risk free interest rate of 2.59%0% and
annualized volatility of 431%0%, valued at $268,683 The value of the conversion feature was assigned to the derivative liability and created a loss and debt discount to be amortized over the life of the convertible debt.$7,491.
On August 10,Eagle Equities LLC
During 2018, the Company entered into a potentially dilutive convertible notethree notes with Eagle Equities LLC. The advance, with a face value of $300,000, bears interest at 8% per annum and is payable on August 10, 2019. The net proceeds received after issuance costs and fees was $285,000. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and original issue discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument. Additionally, the note isnotes are convertible at the holder'sholder’s discretion into shares of the Company'sCompany’s common stock based on a conversion formula of 60% multiplied by the lowest price of the common shares for the 15 day trading period prior to which the Notice of Conversion is received. In the event the Company experiences a DTC Chill on its shares, the Conversion Price shall be decreased to 50% instead of 60% while that chill is in effect. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and original issue discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument. If the Company fails to maintain the share reserve at the 4x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%. The conversion formula created an embedded derivative conversion feature.feature for each note. The notes are summarized as follows:
On July 3, 2018, the Company entered into a convertible note with Eagle Equities LLC. The note, with a face value of $100,000, bears interest at 8% per annum and is payable on July 3, 2019. The net proceeds received after issuance costs and fees was $96,500. On January 22, 2019, Eagle Equities LLC declared a default of the convertible note payable to them resulting in fees and penalties equal to $32,108. Also, on January 22, 2019 Eagle Equities LLC , sold all of its potentially dilutive convertible note to M Svorai Investment, Inc, a related party, including $7,600 in accrued interest. On February 2, 2019 M Svorai Investments, Inc exercised the convertible option, resulting in 5,162,242 shares issued; at a price of $0.02712 per share issued for $132,108 in principal and $7,892 in interest accrued to the conversion date. The
| 17 |
remaining balance principal and interest as of March 31, 2019 was $0. As of December 31, 2018, principal and interest balances were $100,000 and $9,104, respectively.
On August 10, 2018, the Company entered into a convertible note with Eagle Equities LLC. The note, with a face value of $300,000, bears interest at 8% per annum and is payable on August 10, 2019. The net proceeds received after issuance costs and fees was $285,000. On March 14, 2019 Eagle Equities LLC declared a default of the convertible note payable to them resulting in fees and penalties of $142,884, and in same date, sold all of its potentially dilutive convertible note to each of the following: $147,628 to Back Nine Capital, LLC., $147,628 to One Investment Capital, Inc., and $147,628 to Sign N Drive Auto Mall, Inc. As of March 31, 2019 the following chart show the balances on principal and interest as of March 31, 2019:
| Lender | March 31, 2019 | |||||||
| Principal | Interest | |||||||
| Back Nine Capital, LLC (Eagle 2) | $ | 147,628 | $ | 1,234 | ||||
| One Investment Capital, Inc (Eagle 2) | 147,628 | 1,234 | ||||||
| Sign N Drive Auto Mall, Inc (Eagle 2) | 147,628 | 1,234 | ||||||
| Total: | $ | 442,884 | $ | 3,702 | ||||
On March 14, 2019, Back Nine Capital LLC, purchased one third of a potentially dilutive convertible note held by Eagle Equities, LLC, issued on August 10, 2018 with a face value of $300,000 and $142,884 as Default Charges, therefore Back Nine Capital, LLC, now held $147,628. The Company valued thisthe related conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of September 30, 2018:March 31, 2019: dividend yield of zero, 314132 days term to maturity, risk free interest rate of 2.59%2.44% and annualized volatility of 432%, valued at $795,326.349%. The value of the conversion feature was assigned to the derivative liability and created a loss and a debt discount to be amortized over the life of the convertible debt. The principal and interest balances as of March 31, 2019 were $147,628 and $1,234 respectively.
On March 14, 2019, One Investment Capital, Inc, purchased one third of a potentially dilutive convertible note held by Eagle Equities, LLC, issued on August 10, 2018 with a face value of $300,000 and $142,884 as Default Charges, therefore Back Nine Capital, LLC, now held $147,628. The Company valued the related conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of March 31, 2019: dividend yield of zero, 132 days to maturity, risk free interest rate of 2.44% and annualized volatility of 349%. The value of the conversion feature was assigned to the derivative liability and created a loss and a debt discount to amortized over the life of the convertible debt. The principal and interest balances as of March 31, 2019 were $147,628 and $1,234 respectively.
On March 14, 2019, Sign N Drive Auto Mall, Inc, purchased one third of a potentially dilutive convertible note held by Eagle Equities, LLC, issued on August 10, 2018 with a face value of $300,000 and $142,884 as Default Charges, therefore Sign N Drive, now held $147,628. The Company valued the related conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of March 31, 2019: dividend yield of zero, 132 days to maturity, risk free interest rate of 2.44% and annualized volatility of 349%, valued at $422,432. The value of the conversion feature was assigned to the derivative liability and created a loss and a debt discount to amortized over the life of the convertible debt. The principal and interest balances as of March 31, 2019 were $147,628 and $1,234 respectively.
On August 10, 2018, the Company entered into a potentially dilutive convertible note with Eagle Equities LLC. The advance,note, with a face value of $100,000, bears interest at 8% per annum and is payable on August 10, 2019. The net proceeds received after issuance costs and fees was $95,000. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs,The principal and original issue discountinterest balances as reductionof March 14, 2019 were $100,000 and $ 5,384, respectively. As of December 31, 2018, principal and interest balances were $100,000 and $3,784, respectively. On March 14, 2019 Eagle Equities LLC declared a default of the carryingconvertible note payable to them in the amount of the debt$47,198, and amortizes the balances over the lifein same date Eagle Equities LLC, sold all of the debt instrument. Additionally, theits potentially dilutive convertible note is convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 60% multiplied by the lowest price of the common shares for the 15 day trading period prior to which the Notice of Conversion is received. In the event the Company experiences a DTC Chill on its shares, the Conversion Price shall be decreased to 50% instead of 60% while that chill isGary Berlly, an individual, included $47,198 in effect. If the Company fails to maintain the share reserve at the 4x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%. The conversion formula created an embedded derivative conversion feature.
accrued interest and penalties. The Company valued thisthe related conversion
| 18 |
feature using the Black Scholes valuation model with the following assumptions: (i) as of September 30, 2018:March 31, 2019: dividend yield of zero, 314132 days term to maturity, risk free interest rate of 2.59%2.44% and annualized volatility of 432%349%, valued at $264,686.$421,203. The value of the conversion feature was assigned to the derivative liability and created a loss and debt discount to be amortized over the life of the convertible debt. The principal and interest balances as of March 31, 2019 were $147,198 and $1,234 respectively.
Firstfire Global Opportunity Fund, LLC
On September 11, 2018, the Company entered into a potentially dilutive convertible note with Firstfire Global Opportunities Fund, LLC. The advance,note, with a face value of $210,000, bears interest at 5% per annum and iswas payable on July 11, 2018. The note was issued at a $10,000 (“OID”) discount. The net proceeds received after issuance costs and fees was $195,000. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and original issue discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument. Additionally, the note is convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 65% multiplied by the lowest price of the common shares for the 20 consecutive trading days period immediately preceding the Trading Day that the Company receives a Notice of Conversion. The conversion formula created an embedded derivative conversion feature.
On January 16, 2019, Firstfire Global Opportunities Fund, LLC sold all of its potentially dilutive convertible note of $210,000 issued on September 11, 2018 to: (i) twenty five percent (25%) of its potentially dilutive convertible note to Back Nine Capital LLC, or $52,500; (ii) twenty five percent (25%) of its potentially dilutive convertible note to Gary Berlly, or $52,500; (iii) twenty five percent (25%) of its potentially dilutive convertible note to One Investment Capital, or $52,500 and (iv) twenty five percent (25%) of its potentially dilutive convertible note to Sig N Drive Auto Mall, Inc, or $52,500.
On January 22, 2019, Back Nine Capital, LLC exercised the convertible option, resulting in 3,000,000 shares issued; at a price of $0.0130 per share issued for $39,000 in principal. The remaining balance on the note as of March 31, 2019 was $13,500 and $159 in accrued interest. The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of September 30, 2018:March 31, 2019: dividend yield of zero, 256 day95 days term to maturity, risk free interest rate of 2.36%2.40% and annualized volatility of 193%333%, valued at $390,009.$33,388. The value of the conversion feature was assigned to the derivative liability and created a loss and a debt discount to be amortized over the life of the convertible debt.
On January 23, 2019, Gary Berlly exercised the convertible option, resulting in 3,000,000 shares issued; at a price of $0.0130 per share issued for $39,000 in principal. The remaining balance on the note as of March 31, 2019 was $13,500 and $159 in accrued interest. The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of March 31, 2019: dividend yield of zero, 95 days term to maturity, risk free interest rate of 2.40% and annualized volatility of 333%, valued at $33,388. The value of the conversion feature was assigned to the derivative liability and created a loss and a debt discount to be amortized over the life of the convertible debt.
On January 23, 2019, One Investment Capital, Inc exercised the convertible option, resulting in 3,000,000 shares issued; at a price of $0.0130 per share issued for $39,000 in principal. The remaining balance on the note as of March 31, 2019 was $13,500 and $159 in accrued interest. The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of March 31, 2019: dividend yield of zero, 95 days term to maturity, risk free interest rate of 2.40% and annualized volatility of 333%, valued at $33,388. The value of the conversion feature was assigned to the derivative liability and created a loss and a debt discount to be amortized over the life of the convertible debt.
On January 23, 2019, Sign N Drive Auto Mall, Inc exercised the convertible option, resulting in 3,000,000 shares issued; at a price of $0.0130 per share issued for $39,000 in principal. The remaining balance on the note as of March 31, 2019 was $13,500 and $159 in accrued interest. The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of March 31, 2019: dividend yield of zero, 95 days term to maturity, risk free interest rate of 2.40% and annualized volatility of 333%, valued at $33,388. The value of
the conversion feature was assigned to the derivative liability and created a loss and a debt discount to be amortized over the life of the convertible debt.
| March 31, 2019 Convertible Notes Payable Summary - Third Parties | ||||||||||||||||
| Lender | Principal | Interest | Unamortized Debt Discount | Net | ||||||||||||
| Power Up Lending, LTD | $ | — | $ | 2,387 | $ | — | $ | 2,387 | ||||||||
| Back Nine Capital, LLC | 13,500 | 160 | — | 13,660 | ||||||||||||
| Gary Berlly | 13,500 | 160 | — | 13,660 | ||||||||||||
| One Investment Capital, Inc | 13,500 | 160 | — | 13,660 | ||||||||||||
| Sign N Drive Auto Mall, Inc | 13,500 | 160 | (4,165 | ) | 9,495 | |||||||||||
| Back Nine Capital, LLC(Eagle 2) | 147,628 | 1,234 | (134,924 | ) | 13,938 | |||||||||||
| Gary Berlly(Eagle 3) | 147,198 | 1,234 | (134,569 | ) | 13,863 | |||||||||||
| One Investment Capital, Inc(Eagle 2) | 147,628 | 1,234 | (134,950 | ) | 13,912 | |||||||||||
| Sign N Drive Auto Mall, Inc(Eagle 2) | 147,628 | 1,234 | (130,785 | ) | 18,077 | |||||||||||
| Notes Third Parties | $ | 644,082 | $ | 7,962 | $ | (539,393 | ) | $ | 112,651 | |||||||
At December 31, 2018, the above loans had an aggregate outstanding principal balance of $710,000 and unamortized debt discount of $418,314, resulting in net principal of $291,686.
Loans Payable
The Company acquired certain real estate and vehicles, [the unpaid balance is guaranteed by mortgages with a 12 months maturity 5% interest rate, along with a lien and 72 month maturity on the vehicles].
The total mortgage balance with 707 Flats Rd. and Marsan Properties as of December 31, 2018 was $617,400 and $520,000 as of March 31, 2019, which is payable in September 2019.
The Company also has loan agreements with:
| (i) | Ultegra Partner, based on an agreement executed as of December 20, 2018 and payable in weekly payments $11,583, last installment due on January 6, 2020, net proceeds of $339,500. This debt was settled as of February 22, 2019, which included a prospective payment schedule based on the future sale of certain assets. |
| (ii) | Atlas Advanced, based on an agreement executed as of December 10, 2018, payable in net proceeds of $67,450, payable in 90 daily payments of $1,216, last installment due on April 23, 2019. This debt was settled as of June 11, 2019 for one payment of $25,000. |
| (iii) | The 1st Scotia Bank vehicle loan is deferred as follows: (a) within 12 month period: $8,239 (included in the balance sheet as Auto loan, current), and (b) thereafter: $36,017 (included in the balance sheet as Auto loan, non-current) in payments of $9,887 in each of the years 2020 through 2022, and $6,356 in the year 2023. The interest rate for 1st Scotia Bank is 7.29%. This loan is not presented in the following chart, as there is no associated debt discount and it is presented separately in the balance sheet. |
| (iv) | Grand Capital based on agreement executed as of January 3, 2019, this loan was payable in 72 daily payments of $922 been the last installment due on June 11, 2019. This debt was settled as of May 2, 2019, refinancing the settled debt of $55,175 in monthly payments of $1,000 in May 2019, which was properly performed, and $2,000 from June 2019, which also was properly performed, until extinguishing the settled debt. |
| 20 |
| LENDER | LOAN AMOUNT | NET OF PROCEEDS | DEBT DISC. & ORIGIN. FEES | INT RATE | TERMS OF PAYMENT | NET BALANCE AS OF MARCH 31, 2019 | ||||||||||||||||||||
| Ultegra Financial Partners | $ | 648,945 | $ | 339,500 | — | 84.98 | % | Sale of Assets | $648,945 | |||||||||||||||||
| Atlas Advanced Funding | 80,245 | 67,450 | (30,055 | ) | 332.38 | % | Settled | 50,190 | ||||||||||||||||||
| 707 Flats Road | 134,900 | — | — | — | December 2019 | 134,900 | ||||||||||||||||||||
| Marsan Properties | 520,000 | — | — | 5 | % | December 2019 | 520,000 | |||||||||||||||||||
| Grand Capital | 56,391 | 40,500 | (22,524 | ) | 429 | % | Monthly | 33,867 | ||||||||||||||||||
| Total: | 1,440,481 | $ | (52,579 | ) | $1,387,902 | |||||||||||||||||||||
The aggregate principal balance and unamortized debt discount on these loans totaled $52,579 and $180,085, respectively, at March 31, 2019 and December 31, 2018. During the three months ended March 31, 2019 and 2018, the Company received, in aggregate, total proceeds of $40,500 and $0, respectively.
NOTE 6:6 : RELATED PARTY LOANS:LOANS
Convertible Notes Payable
On February 21, 2018 Crown Bridge Partners LLC, sold part of its potentially dilutive convertible note to D&D Capital, Inc, a related party. Accrued interest related to this advance was $392$686 and $0$541 at September 30, 2018March 31, 2019 and December 31, 2017, respectively, and is included in accrued interest on the condensed consolidated Balance Sheets.2018, respectively. The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i)model; as of September 30, 2018 dividend yieldMarch 31, 2019, due to the note is in default there are no assumptions, therefore the note has a conversion option ’s value of zero, 179 days term to maturity, risk free interest rate of 2.36% and annualized volatility of 200%, valued at $20,817.$33,335. The value of the conversion feature was assigned to the derivative liability and created a loss and a debt discount to be amortized over the life of the convertible debt.
During the nine months ended September 30, 2018, D&D Capital, Inc., exercised the convertible option, resulting in 2,298,212 shares issued; at a price of $0.04134 per share issued for $95,008 in principal and $2,387 in accrued interest.
The remaining principal balance as of September 30, 2018March 31, 2019 is $ 7,379.
During the three months ended March 31, 2018, Kodiak Capital declared a default of the convertible note payable to them invoking 22% retroactive interest and also put into effect a penalty of $2,000 per day for non-delivery of the shares according to the note agreement, which led to increasing the balance of the note to $142,633 (including $2,630 accrued interest on the Kodiak note) at March 31, 2018. On February 15, 2018, S&E Capital, LLC, a related party to Mining Power Group Inc., reached an agreement with Kodiak Capital to purchase the note. As a result, the Company recognized a gain of $137,054.
During$137,054 due to the nine months ended September 30,adjustment to remove all aspects of the Kodiak note (derivative liability and unamortized issuance cost and debt discount. During 2018, S&E Capital, Inc., exercised the convertible option, resulting in 2,450,000 shares issued; at a price of $0.04134 per share issued for $101,283 in principal and $11,497 in accrued interest.
The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i)model; as of September 30, 2018 dividend yieldMarch 31, 2019 due to the note is in default there are no assumptions, therefore the note has a conversion option ’s value of zero, 15 days term to maturity, risk free interest rate of 2.12% and annualized volatility of 183%, valued at $117,049.$182,454. The value of the conversion feature was assigned to the derivative liability and created a loss and a debt discount to be amortized over the life of the convertible debt.
The remaining principal balance as of September 30, 2018 was $49,775.
Other Related Party Loans
Other than the above convertible notes, the following are related party loans to fund operations that bear no interest and are due on demand:
| Consultant Capital Group, Inc | $ | 114,527 | ||
| D&D Capital, Inc | 211,000 | |||
| Total Related Party no interest due on demand Loans | $ | 325,527 |
NOTE 7: EQUITY
On November 27, 2017, the Company issued 1,000,000 shares of Series A Convertible preferred stock for $125,000. The Preferred StockMarch 31, 2019 is convertible to the Company's common stock. Each share of the Company's Series A Convertible preferred stock is convertible into 1,000 shares of the Company's common stock at a cost basis equivalent to par value per share, or $0.0001. Each share of the Series A Convertible preferred stock votes at the equivalent of 20,000 shares of common stock. Conversion of all Series A preferred stock is dependent upon increasing the number of authorized shares to a quantity large enough to cover the conversion, therefore conversion isn’t triggered unless the Company increases its authorized shares to a quantity large enough to cover conversion.$ 49,775.
On January 10, 2018 the Company issued 37,000,000 common stock restricted shares, $0.0001 par value per share,
| Lender | Principal | Interest | Net | |||||||||
| D&D Capital, Inc | $ | 7,379 | $ | 686 | $ | 7,379 | ||||||
| S&E Capital, LLC | 49,775 | 16,958 | 49,775 | |||||||||
| Notes Related Parties | $ | 57,154 | $ | 17,644 | $ | 57,154 | ||||||
converting 37,000 shares
At March 31, 2019 and December 31, 2018, the principal unamortized debt discount for related parties convertible notes was $57,154, interest for related parties convertible notes was $17,644 as of March 31, 2019, and $ 14,798 as of December 31, 2018. Debt conversion discount for these notes was $0 at March 31, 2019 and $12,126 on December 31, 2018.
Other Related Party Loans
The Company has non-interest bearing demand loans with various related parties. During the one million (1,000,000) Series A Preferred Stock,
On February 28,three months ended March 31, 2019 and 2018, the Company issued 156,333 sharesreceived $109,232 and $38,301, respectively, in proceeds from these loans, and made repayments of common stock valued at the conversion price$83,386 and $0, respectively, resulting in principal balances of $0.18. The shares were issued to convert $28,140$416,024 and $360,528 as of the principal amount of the note dated May 30, 2017 to Power Up Lending Group Ltd.March 31, 2019 and December 31, 2018, respectively.
NOTE 7 : EQUITY
On March 6, 2018January 28, 2019 the Company issued 109,569 shares of common stock valued at the conversion price of $0.1753. The shares were issued to convert $16,928 of the principal amount and $2,280 of accrued and unpaid interest of the Note dated as of May 30, 2017 to Power Up Lending Group Ltd.
On April 25, 2018 the Company issued 45,000 shares of common stock value at the conversion price of $0.078. The shares were issued to convert $3,510 of the principal amount of the Note dated as of May 30, 2017, to Power Up Lending Group Ltd.
On April 25, 2018 the Company issued 187,533 shares of common stock value at the conversion price of $0.0754. The shares were issued to convert $14,140 of the principal amount of the Note dated as of September 27, 2017, to Power Up Lending Group Ltd.
On May 3, 2018 the Company issued 2,500,000 shares of common stock at $0.0001par value to Shelby White, which were subsequently cancelled in July 2018.
On July 6, 2018 the Company issued 1,715,961 shares of common stock at the conversion price of $0.03897. The shares were issued to convert $59,200 of principal amount and $7,761 of interest, on the Note dated as of March 24, 2017, to Eagle Equities, LLC.
On July 7, 2018 the Company issued 10,000,00060,000,000 common stock restricted shares, $ 0.0001 par value per share, converting 10,00060,000 shares of the one million (1,000,000) Series A Preferred Stock.
On August 3, 2018February 1, 2019 the Company issued 2,298,2123,000,000 shares of common stock at the conversion price of $0.04134.$0.0130. The shares were issued to convert $ 95,008; $92,621$39,000 of principal amount, and $2,387 of interest, on the Notenote dated as of March 27, 2017,September 11, 2018 to D&D Capital, Inc.Gary Berlly.
On August 6, 2018February 1, 2019 the Company issued 150,000 shares of restricted common stock, $0.0001 par value per share for payment of services to individuals for a total value of $15.
On September 12, 2018 the Company issued 812,0003,000,000 shares of common stock at the conversion price of $0.06.$$0.0130. The shares were issued to convert $44,016$39,000 of principal amount, and $4,704 of interest, on the Notenote dated as of March 27, 2017,September 11, 2018 to Crown Bridge PartnersBack Nine Capital, LLC.
On September 12, 2018February 1, 2019 the Company issued 2,450,0003,000,000 shares of common stock at the conversion price of $0.04134.$$0.0130. The shares were issued to convert $101,283$39,000 of principal amount, on the Notenote dated as of March 27, 2017,September 11, 2018 to S&EOne Investment Capital, Inc.
On September 28, 2018February 1, 2019 the Company issued 619,2773,000,000 shares of common stock at the conversion price of $0.05023.$$0.0130. The shares were issued to convert $27,860$39,000 of principal amount, on the note dated September 11, 2018 to Sing N Drive Auto Mall, Inc.
On February 4, 2019 the Company issued 5,162,242 shares issued; at a price of $0.02712. The shares were issued to convert $132,108 in principal and $3,246 of$7,892 in interest, on the note dated May 15, 2017July 3, 2018, to M Svorai Investment, Inc.Investments, Inc a related party.
In connection with the above debt conversions occurring in February 2019, derivative liabilities totaling $1,287,038 were eliminated, with the offset recorded as an increase to additional paid-in capital.
On September 30, 2018March 15, 2019 the Company signed a Common Stock Purchase Agreement with Triton Funds LP, who was committed to purchase from time to time andissued 40,000,000 common stock restricted shares, $ 0.0001 par value per share, converting 40,000 shares of the one million (1,000,000) Series A Preferred Stock.
On March 22, 2019 the Company issue and sell One Million Dollars ($1,000,000)issued 50,000,000 common stock restricted shares, $ 0.0001 par value per share, converting 50,000 shares of the Company’s Commonone million (1,000,000) Series A Preferred Stock. The purchase price was established at 18% discount to lowest closing price five days prior to the Closing Date.
On September 30, 2018 the Company signed a Registration Rights Agreement to Triton Funds LP, related to the Common Stock Purchase Agreement.
NOTE 8:8 : COMMITMENTS AND CONTINGENCIES;
During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with ASC 450-20-50,Contingencies.The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. As of September 30, 2018, the Company is not aware of any contingent liabilities that should be reflected in the accompanying consolidated financial statements.
| 22 |
NOTE 9: ACQUISITION NORTHWAY MINING, LLC
On August 1, 2018, the Company entered into an acquisition agreement (the “Acquisition Agreement”) to acquire the majority ownership interest of Northway Mining, LLC (“Northway”), a New York limited liability company, located at 707 Flats Road, Athens, New York. Northway is a cryptomining data center hosting third-party owned and operated cryptomining machines within its 5000 square feet facility. It currently is hosting over 1,100 machines in its facilities at Flats Road under individual service agreements with third-party machine owners.
Pursuant to the Acquisition Agreement the Company acquired fifty-five percent (55%) of the ownership units of Northway in return for an investment of $1,100,000 for the purposes of providing working capital and funds to Northway for improvements to, and expansion of, its facilities, and the purchase of 30-acres of flat land and buildings at its Athens, New York address owned by a third party per a separate “Agreement for Purchase of Property between Northway Mining, LLC and CSX4236 Motorcycle Salvage LLC” (the “Land Purchase Agreement”). (The “Acquisition”) Under the terms and conditions of the Acquisition, Northway has amended and restated its New York State limited liability company Operating Agreement, under which it is stated that it will maintain its current management.
NOTE 10:9 : SUBSEQUENT EVENTS AFTER SEPTEMBER 30, 2018MARCH 31, 2019
The Company has evaluated subsequent events that occurred through the date of the filing of the Company's third quarter 2018 Form 10-Qthese financial statements were issued and has determined there are the following subsequent events requiring disclosure:as the following:
On October 16, 2018,July 1, 2019 the Company issued 500,000 sharessold any and all interest of restrictedNorthway Mining, LLC to Dror Svorai, under common stock for $125,000 donated to Triton Funds LLC.control and all its operations on behalf of Canna Corporation have been discontinued.
On January 2, 2019, Eagle Equities, LLC declared16, 2020, the "Company" entered into an agreement (the "Acquisition Agreement"), to acquire the majority ownership interest of Agra Nutraceuticals Corporation ("Agra"), a defaultColorado corporation, having a registered business address of 67 SW 12th Ave, Ste 500, Deerfield Beach, Florida 33442. Pursuant to the Acquisition Agreement the Company acquires seventy-seven and one-half percent (77.5%) of the convertible promissory note issued and outstanding shares of common stock of Agra to them on July 3, 2018 bybe transferred to it from the Company as a resultmajority shareholder of Agra, SBS Eco Trust. In consideration of the Company’s failure to file on time its quarterly report on Form 10-Q for the period ended September 30, 2018. In doing so, Eagle Equities invoked retroactive 22% default interest and also put into effect certain penalties under to the note, which led to their increasing the outstanding balanceacquisition of the note to $140,000 (including $12,236 accrued interest) at January 22, 2019,Agra shares, Dror Svorai, the date at which M Svorai Investments, Inc., a related party to the Company, reached an agreement with Eagle Equities, LLC to purchase the note from Eagle Equities, LLC in order to avoid further actions that may be taken by Eagle Equities, LLC as a resultRegistrant's majority shareholder, President, CEO and sole officer and director transferred his 803,000 shares of the default.
On January 24, 2019, the Company issued 60,000,000Registrant's Series A Preferred Stock and 197,000,000 shares of its common stock by converting 60,000 Series A Preferred Stock held by Dror Svorai,to SBS Eco.
In connection with the Acquisition Agreement, the Company underwent a change of control. As a result of the Acquisition, the SBS Eco Trust, whose trustee is Esther Bittelman, an individual, and sole DirectorSecretary of Agra, became controlling and Presidentmajority shareholder of the Company.Registrant (the "Change of Control").
On February 1 2019,January 16, 2020, Back Nine Capital, LLC, irrevocably elects to exercise the Company issued 12,000,000 restricted shares of common stock valued at the conversion price of $0.013. The shares were issued to four unrelated parties which in aggregate purchased and converted $210,000 of the principal amount not including accrued and unpaid interest of aright granted under certain Convertible Promissory Note dated September 11, 2018 which was issuedand assigned to FirstFire Global Opportunities Fund, LLCthe current holder per that certain Note Purchase and Assignment Agreement, dated January 16, 2019, to convert $15,744 including principal together with any unpaid regular and penalty interest accrued, into 832,351 shares of the Company’s common stock at a price of $0.018915
On February 4,January 16, 2020, D&D Capital Inc., irrevocably elects to exercise the rights granted under that certain Convertible Promissory Note date July 1, 2019 to convert $125,712 into 9,600,000 shares of the Company’s common stock at a price of $0.013095.
On January 16, 2020, Gary Berlly irrevocably elects to exercise the right granted under certain Convertible Promissory Note dated September 11, 2018 and assigned to the current holder per that certain Note Purchase and Assignment Agreement, dated January 16, 2019, to convert $15,744 including principal together with any unpaid regular and penalty interest accrued, into 832,351 shares of the Company’s common stock at a price of $0.018915
On January 16, 2020, Sign N Drive Auto Mall, Inc., irrevocably elects to exercise the right granted under certain Convertible Promissory Note dated September 11, 2018 and assigned to the current holder per that certain Note Purchase and Assignment Agreement, dated January 16, 2019, to convert $15,744 including principal together with any unpaid regular and penalty interest accrued, into 832,351 shares of the Company’s common stock at a price of $0.018915
As a result of entry into the Acquisition Agreement, Mr. Svorai resigned at the end of the business day on January 17, 2020, following the appointments and acceptances by the new officers and directors of the Company, issued 5,162,242 restrictedAgra will be operated as a majority-owned subsidiary of the Company. The Acquisition will become effective 20 days following the mailing of the Information Statement to shareholders pursuant to Schedule 14. The mailing has not occurred yet.
There are a total of 1,000,000 shares designated as Series A Preferred Stock. Each share of Series A Preferred converts to 1,000 shares of common. Each share of the Series A Series A Preferred Stock has the voting rights equivalent of 20,000 shares of common stock valued at(identical in every other respect to the conversion price of $0.02712. The shares were issued to convert $100,000voting rights of the principal amount and $40,000holders of accrued and unpaid interest and penalties oncommon stock entitled to vote at any regular or special meeting of the Note dated as of July 3, 2018 to Eagle Equities, LLC, which Note was purchased fromshareholders).
Eagle Equities, LLC by a related party on January 22, 2019, which converted the Note in full.
Name Change
On December 14, 2018,April 4, 2019, the Company effected a name change in the State of Colorado from Mining Power Group, Inc. to “Canna Corporation” in preparation for a refocus of its business plan. Similarly, the name change was servedfiled in the State of Florida, where the Company’s headquarters are located.
Lawsuits
Atlas Funding v Northway. The Company accrued a liability of $55,000 based on a litigationthe Company’s attorney’s assessment. This lawsuit was filed by Salcido Enterpriseson February 2019 due to default debt. The Company and Atlas executed on settled as of June 11, 2019 for one payment of $25,000.
Northway Mining, LLC Index No. 18-01082 at thevs. Marsan Properties, Inc. vs. Northway Mining, Supreme Court of the State of New York, County of Greene. On November 15, 2018Greene, Case Index No. 2019-269 filed April 11, 2019. The parties agreed to sign a Stipulation of Settlement wherein the debt on the property is refinanced.
Premier Properties, Inc vs CSX4236 and Northway Mining, LLC. Supreme Court of the State of New York, County of Greene, Case Index No. 18-0825, pertaining to foreclosure on property located at 707 Flats Road, Athens, NY. At this time there is an ongoing negotiation with a potential outcome of selling this property and therefore paying off the debt. This property is no longer used by Northway.
9384-2557 Quebec Inc, Minedmap, Inc and Serenity Alpha, LLC - Husk Mining, LLC vs Northway Mining LLC soldand others. United States District Court for the Eastern District of New York, Case No. 1:19-CV-1994, filed on April 7, 2019. Case involves several causes of action and open-ended claims. The Company was never served, and searching on PACER (Public Access to Plaintiff certain number of cryptomining computers for $238,700. The Plaintiff suedCourt Electronic Records) no results were obtained, therefore it is the Company for failure to deliver the computers on time. Company’s understanding that such lawsuit doesn’t exist.
On January 10,May 2, 2019, the Company receivedsettled for $55,175 the lawsuit initiated by Grand Capital, in the amount of $75,225, by weekly payments of $1,000 beginning May 8, 2019 via two (2) debits of $500 and beginning July 8, 2019 weekly payments of $2,000 via four (4) debits of $500. After the first payment Grand Capital agrees to forebear from the Plaintiff a Notice of Discontinuance of the litigation Without Prejudice. No further actions is expected.
On December 24, 2018,enforcing any UCC liens, judgment levies, and/or restraints on the Company through Northway Mining, LLC, borrowed $486,500 from Ultegra Financial Partners, Inc., under weekly payments starting on December 28, 2018. The Company failed to make certain payments on time. As a result, on February 11, 2019, Ultegra Financial Partners, Inc. filed a lawsuit against the Company demanding payment of the loan in addition to default charges. At the time of filing of this 2018 Q3, a settlement has been reached and the withdrawal of the litigation is anticipated.
On January 16, 2019, The Company through Northway Mining, LLC, borrowed $45,000 from Grand Capital Funding, under daily payments starting on January 7, 2019. The Company failed to make certain payments on time. As a result, on February 20, 2019, Grand Capital filed a lawsuit against the Company demanding payment of the loan in addition to default charges. A settlement has been reached and the litigation is expected to be resolved.account.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.Forward-Looking Statements and Associated Risks.
This formForm 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "estimate,” or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include but are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.
Going Concern
Based on our financial history since inception, our auditor has expressed substantial doubt as to our ability to continue as a going concern. As reflected in the accompanying consolidated financial restated statements, as of September 30, 2018,March 31, 2019, we had an accumulated deficit totaling $2,812,030.$ 5,581,732 . This raises substantial doubts about our ability to continue as a going concern.
Plan of Operation
The Company was incorporated under the laws of the State of Florida on July 29, 2013. The Company was established to manufacture and distribute high-quality, hand rolled, premium cigars under the Rich Cigars brand name. Beginning on January 1, 2018in December 2017, the Company wound down and discontinued its operations pertaining to the manufacture and distribution of cigars. Effective at the same date, the Company began the process of re-focusing its operations to become a holding company wherein its primary focus would be to own and operate subsidiary companies in the cryptocurrency business, principally companies either engaged in cryptocurrency mining directly, data center operations for cryptomining, or the development of proprietary products and services for the cryptocurrency business sector itself. The Company is confident that it will be able to implement its new focus and strategy in the fourth quarter of 2018.
On August 1, 2018 the Company had entered into an agreement (the "Acquisition Agreement") to acquire the majority ownership interest of Northway Mining, LLC., a New York limited liability company, located at 707 Flats Road, Athens, New York. Based on the Acquisition Agreement, the Company was granted by the membership a fifty-five percent (55%) ownership in Northway, free and clear of all encumbrances, liens and other obligations, and the remaining forty-five percent (45%) shall remain owned by the previous members. As a result of the Company acquiring the Northway ownership interest, Northway is a majority-owned subsidiary of the Company.
Results of Operations
Three Months Ended September 30, 2018March 31, 2019 Compared to September 30, 2017March 31, 2018
For the three months ended September 30, 2018,March 31, 2019, we had $185,869$10,391 in revenues and $145,428$436,403 in cost of goods sold compared to $0 and $0, respectively, for the same period one year earlier, the increase in cost of goods sold was due to an adjustment made by the energy provider and accrued on 2019Q1. For the three months ended March 31, 2019, our total operating expenses were $131,679, as compared to $38,301 for the three months ended March 31, 2018, this substantial increase was originated on the Company operations not existing one year earlier. For the three months ended September 30, 2018, our total operating expenses were $ 491,819 as compared to $46,977 for the three months ended September 30, 2017. For the three months ended September 30, 2018,March 31, 2019, we incurred $484,085$103,214 for other general and administrative expenses compared to $46,446$38,301 of general administrative expenses for discontinued operations for the same period in 20172018, the increased expenses were due to change in control and acquisitionthe operations of Northway Mining.Mining LLC acquired on August 1, 2018.
For the three months ended September 30, 2018,March 31, 2019, we had $331,270$1,021,424 in interest expense, which included $383,333 of interest related to the Ultegra Settlement and Release Agreement, compared to $19,012$280,784 for the same period one year earlier, also because the increase level of debt the Company had as of March 31, 2019. For the three months ended
| 25 |
March 31, 2019, we had a loss of $314,569 from the change in fair value of derivative liability, and a gain of $4,172,029 for the same period one year earlier. For the three months ended September 30, 2018, we had $1,101,759 increase in fair value of derivative liability and a $370,306 decrease for the same period one year earlier. For the three months ended September 30, 2018 we had $1,409,311 in beneficial conversion feature and derivative interest compared to $0 for the
same period one year earlier. For the three months ended September 30, 2018 we had $250 in subscription receivable write off, compared to $0 as for the same period one year earlier. For the three months ended September 30, 2018March 31, 2019 we had a $26,028$6,189 impairment loss on cryptocurrency compared to $0 as for the same period one year earlier, the Company was not dealing on cryptocurrency one year earlier. For the three months ended September 30, 2018March 31, 2019 we had a net loss of $936,853$2,098,276 compared to $436,295 for the same period one year earlier.
Nine Months Ended September 30, 2018 Compared to September 30, 2017
For the nine months ended September 30, 2018, we had $185,869 in revenues and $145,428 in costa net income of goods sold compared to $4,606 and $2,382, respectively,$3,989,500 for the same period one year earlier, from discontinued operations. For the nine months ended September 30, 2018, our total operating expensesvariance was $545,767 as compareddue to $314,575 forfew concurrent factors: (i) the nine months ended September 30, 2017. Forgain on derivative liability, the nine months ended September 30, 2018, we incurred $538,033 for other general and administrative expenses, compared to $238,109 for the same period in 2017. The changes in these categorieslower interest level and the reductionloss in total operating expenses were due toderivative liabilities occurred in the wind down and discontinuation of the prior cigar business. Northway Mining, LLC, otherwise has increased revenues and expenses as well.
For the nine months ended September 30, 2018, we had $680,413 in interest expenses compared to $27,278 for the same period one year earlier. For the nine months ended September 30, 2018, we had an $8,398,544 increase in fair value of derivative liability and a decrease of $443,917 for the same period one year earlier. For the nine months ended September 30, 2018 we had $498 in Fixed Asset Write-off and $0 for the same period one year earlier. For the nine months ended September 30, 2018 we had $5,091,530 in Beneficial conversion feature and derivative interest compared to $0 for the same period one year earlier. For the nine months ended September 30, 2018 we had a $26,028 loss on cryptocurrency compared to $0 as for the same period one year earlier. For the nine months ended September 30, 2018 we had a $137,054 gain on extinguishment of debt compared to $0 as for the same period one year earlier. For the nine months ended September 30, 2018 we had a net income (loss) of $2,410,929 compared to ($785,770) for the same period one year earlier.2019Q1.
Liquidity and Capital Resources
As of September 30, 2018,March 31, 2019, our cash balance was $235,843$1,756 as compared to $0$183,347 at December 31, 2017.2018. Our plan for satisfying our cash requirements for the next twelve months is through the sale of shares of our common stock, third party financing, and/or traditional bank financing. We do not anticipate generating sufficient amounts of revenues to meet our working capital requirements. Consequently, we intend to make appropriate plans to insureensure sources of additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities.
The Company must raise additional funds in order to fund our continuing operations. We may not be successful in our efforts to raise additional funds or achieve profitable operations. Even if we are able to raise additional funds through the sale of our securities or through the issuance of debt securities, or loans from our directors or financial institutions our cash needs could be greater than anticipated in which case we could be forced to raise additional capital. At the present time, we have no commitments for any additional financing, and there can be no assurance that, if needed, additional capital will be available to us on commercially acceptable terms or at all. These conditions raise substantial doubt as to our ability to continue as a going concern, which may make it more difficult for us to raise additional capital when needed. If we cannot get the needed capital, we may not be able to become profitable and may have to curtail or cease our operations.
Operating Activities
During the ninethree months ended September 30, 2018,March 31, 2019, the Company used cash in the amount of $132,617$95,856 in operating activities, compared to $250,550$38,301 over the same period in 2017.2018, in our understanding such increase was due to the lower level in operational activities and the effects of derivative liabilities, which had a great impact as of March 31, 2018
Investing Activities
During the ninethree months ended September 30, 2018,March 31, 2019, the Company used cash in the amount of $633,567$103,805 in investing activities, compared to $0 over the same period in 2017. Acquisition2018. The acquisitions were Pods ordered in the first month of building and equipment for the business
operation of Northway Mining, LLC, required such investments.2019 Q1, due to expectations about new customer base gains.
Financing Activities
During the ninethree months ended September 30, 2018, $1,002,027March 31, 2019, $18,070 in net cash was provided to the Company from its financing activities, compared to $246,290$38,301 over the same period in 2017.2018. The financing activity reflects the requirement for funding due to the cryptocurrency mining expectations.
We intend to seek additional funding through public or private financings to fund our operations through fiscal 20182019 and beyond. However, if we are unable to raise additional capital when required or on acceptable terms, or achieve cash flow positive operations, we may have to significantly delay product development and scale back operations both of which may affect our ability to continue as a going concern.
Off Balance Sheet Arrangements
None
| 26 |
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.
Management has carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. Due to the lack of personnel and outside directors, management acknowledges that there are deficiencies in these controls and procedures. Thus, the results of this evaluation determined that our disclosure controls and procedures, as well as our internal control over financial reporting, waswere ineffective as of September 30, 2018.March 31, 2019.
Changes in Internal Control Over Financial Reporting
There were no changes, other than the acquisition of Northway Mining, LLC, in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the quarter ended September 30, 2018March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. The acquisition of a majority interest in Northway Mining, LLC, was supervised by Northway’s top officer, based on permanent overseen over all transactions to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes.
PART II-OTHER INFORMATION
Northway Mining,Salcido Enterprises LLC, was served on September 17, 2018, in connection with a foreclosure action against CSX4236 Motorcycle Salvage LLC, initiated by Premier Properties, Inc, in thev Northway. Supreme Court of the State of New York, County of Greene, Case Index No. 18-0825.18-01082, filed January 10, 2019. Case was dismissed against the Company by the court without prejudice.
Atlas Funding v Northway. The Company accrued a liability of $55,000 based on the Company’s positions is that this action is totally without merit under the termsattorney’s assessment. This lawsuit was filed due to default debt.
Northway Mining, LLC vs. Marsan Properties, Inc. vs. Northway Mining, Supreme Court of the purchase contract. AsState of New York, County of Greene, Case Index No. 2019-269 filed April 11, 2019. The parties agreed to sign a Stipulation of Settlement wherein the debt on the property is refinanced.
Premier Properties, Inc vs CSX4236 and Northway Mining, LLC. Supreme Court of the dateState of New York, County of Greene, Case Index No. 18-0825, pertaining to foreclosure on property located at 707 Flats Road, Athens, NY. At this filing,time there is an ongoing negotiation with a potential outcome of selling this property and therefore paying off the litigation remains open.debt. This property is no longer used by Northway.
Ultegra Financial Partners, Inc vs Northway Mining LLC. District Court of the District of Colorado, was settled in the amount of $680,000 on which the Company paid $30,000 and the remaining amount shall be paid with the sale of some of the Company’s assets, accordingly the Settlement Agreement and Releases executed on February 22, 2019.
9384-2557 Quebec Inc, Minedmap, Inc and Serenity Alpha, LLC - Husk Mining, LLC vs Northway Mining LLC and others. United States District Court for the Eastern District of New York, Case No. 1:19-CV-1994, filed on April 7, 2019. Case involves several causes of action and open-ended claims. The Company was never served, and searching on PACER (Public Access to Court Electronic Records) no results were obtained, therefore it is the Company understanding that such lawsuit doesn’t exist.
Grand Capital vs. Northway Mining LLC and others. Supreme Court of the State of New York County of Steuben, Index No. E2019-0138CV, filed on February 5, 2019. Claim is for $75,225, case is pending. According to the Company’s attorney’s legal opinion, the Company accrued a liability of $28,000. On May 2, 2019 the Company settled for $55,175 the lawsuit initiated by Gran Capital, in the amount of $75,225, by weekly payments of $1,000 beginning May 8, 2019 via two (2) debits of $500 and beginning July 8, 2019 weekly payments of $2,000 via four (4) debits of $500. After the first payment Grand Capital agrees to forebear from enforcing any UCC liens, judgment levies, and/or restraints on the Company account.
Not Applicable to Smaller Reporting Companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On February 8, 2018 the Company issued 37,000,000 common stock shares, $0,0001 par value per share converting 37,000 shares of the 1,000,000 Series A Preferred Stock, based on the Articles of Incorporation of Power Mining Group, Inc, filed with the State of Colorado.
On July 6, 2018 the Company issued 10,000,000 common stock restricted shares, $0.0001 par value per share, converting 10,000 shares of the 963,000 Series A Preferred Stock, based on the Articles of Incorporation of Power Mining Group, Inc, filed with the State of Colorado.
On July 6, 2018 the Company issued 1,715,961 shares of common stock value at the conversion price of $0.3897. The shares were issued to convert $59,200 of the principal amount and $7,671 interest of the Note dated as of March 24, 2017, to Eagle Equities LLC.
On August 3, 2018 the Company issued 2,298,212 shares of common stock value at the conversion price of $0.04134. The shares were issued to convert $92,621 of principal, interest including penalty charge of the Note dated as of March 27, 2017, to D&D Capital, Inc.
On August 6, 2018 the Company issued 150,000 common stock restricted shares, $0.0001 par value per share, to each of three persons, 150,000 shares total, for services rendered.
On September 12, 2018 the Company issued 812,000 shares of common stock at the conversion price of $0.04134. The shares were issued to convert $44,016 of principal amount and $4,704 of interest, on the Note dated as of March 27, 2017, to Crown Bridge Partners LLC.
On September 12, 2018 the Company issued 2,450,000 shares of common stock at the conversion price of $0.04134. The shares were issued to convert $101,283 of principal amount, on the Note dated as of March 27, 2017, to S&E Capital, Inc.
On September 28, 2018 the Company issued 619,277 shares of common stock at the conversion price of $0.05023. The shares were issued to convert $27,860 of principal amount and $3,246 of interest, on the Note dated as of May 15, 2017 to M Svorai Investment, Inc.
On October 16, 2018 the Company issued 500,000 shares of common stock due to a signed a Registration Rights Agreement to Triton Funds LP, related to the Common Stock Purchase Agreement.
On January 28, 2019 the Company issued 60,000,000 common stock restricted shares, $0.0001 par value per share, converting 60,000 shares of the 963,000 Series A Preferred Stock, based on the Articles of Incorporation of Power Mining Group, Inc, filed with the State of Colorado.
On February 1, 2019 the Company issued 3,000,000 shares of common stock at the conversion price of $0.0130 . The shares were issued to convert $39,000 of principal amount, on the note dated September 11, 2018 to Gary Berlly.
| 28 |
On February 1, 2019 the Company issued 3,000,000 shares of common stock at the conversion price of $0.0130 . The shares were issued to convert $39,000 of principal amount, on the note dated September 11, 2018 to Back Nine Capital, LLC.
On February 1, 2019 the Company issued 3,000,000 shares of common stock at the conversion price of $0.0130 . The shares were issued to convert $39,000 of principal amount, on the note dated September 11, 2018 to One Investment Capital, Inc.
On February 1, 2019 the Company issued 3,000,000 shares of common stock at the conversion price of $0.0130. The shares were issued to convert $39,000 of principal amount, on the note dated September 11, 2018 to Sing N Drive Auto Mall, Inc.
On February 4, 2019 the Company issued 5,162,242 shares issued; at a price of $0.02712. The shares were issued to convert $132,108 in principal and $7,892 in interest, on the note dated July 3, 2018, to M Svorai Investments, Inc a related party.
On March 15, 2019 the Company issued 40,000,000 common stock restricted shares, $0.0001 par value per share, converting 40,000 shares of the 893,000 Series A Preferred Stock, based on the Articles of Incorporation of Power Mining Group, Inc, filed with the State of Colorado.
On March 22, 2019 the Company issued 50,000,000 common stock restricted shares, $0.0001 par value per share, converting 50,000 shares of the 853,000 Series A Preferred Stock, based on the Articles of Incorporation of Power Mining Group, Inc, filed with the State of Colorado.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable.
Amendment to Articles of Incorporation Changing Name of the Company
On April 4, 2019, the Company filed an amendment to its Articles of Incorporation whereby it changed its name to “Canna Corporation”.
Acquisition and Change of Control of the Company
On January 16, 2020 as a result of a Share Exchange, the Company acquired majority control of Agra Nutraceuticals Corporation, a Colorado corporation, (“Agra”) with a headquarters business address of 67 SW 12th Ave, Ste 500, Deerfield Beach, Florida 33442. As a result, Agra becomes a majority-owned subsidiary of Canna to operate under its own management. (The Acquisition)
In connection with the Acquisition, the Company underwent a change of control, whereby the controlling and majority shareholder of Agra, the SBS Eco Trust, in return for its controlling majority shares of Agra representing 77.5% of all the issued and outstanding shares of Agra, received from the controlling and majority shareholder of Canna, all issued and outstanding shares of the Company’s supervoting Series A Preferred Stock and 197,000 restricted shares of the Company’s common stock (the “Share Exchange”). In a result of the Share Exchange, the SBS Eco Trust, whose trustee is Esther Bittelman, an individual, and Secretary of Agra, became controlling and majority shareholder of Canna (the “Change of Control”).
| 29 |
In accordance with the terms and conditions of the Acquisition Agreement, dated and signed on January 16, 2020, the official record date of the Acquisition will occur twenty (20) days following the filing with the SEC and the simultaneous mailing to the shareholders of record of Canna, of an Information Statement on the Acquisition and the Change of Control. At the time of this filing, the record date of the Acquisition has not been established.
Change In Officers and Directors.
On August 1, 2018,January 16, 2020, as a result of the Company’s entry into that certain Acquisition Agreement effecting a change of control of the Company, appointed Dror Svorai to its Board of Directors. Following Mr. Svorai's appointment and acceptance as a memberthe following persons became new members of the Board of Directors the Board of Directors accepted the resignation of Yaniv Nahon as the President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and a member of the Board of Directors. Immediately following the resignation of Mr. Nahon, the Board of Directors appointed Dror Svorai, a member of the Board of Directors, as the Corporation's President/Chief Executive Officer, Secretary, Treasurer and Chief Financial Officer of the Company. Therefore, as of August 1, 2018, the sole member of the Board of Directors and sole officer of the Company isand its officers (the “New Members and Officers”):
| Name | Position |
| Sacha Alessandro Ceruti | President and CEO, Director |
| Devin Avery | Treasurer, Director |
| Esther Bittelman | Secretary, Director |
| Daniel Rodgers | Director |
| Syed Rizvi | Director |
| David Lilly | Director |
Following the acceptance of the six new members to the board of directors, and their appointment of the new officers and directors, Dror Svorai.Svorai, President and CEO, and sole Director, resigned effective end of the business day on January 17, 2020.
Mr. NahonSvorai did not resign as a result of any disagreement with the Company on any matter relating to the Company's operations, policies or practices.
The Company has not adopted, nor has it ever had in place, any procedures by which security holders may recommend nominees to the Company's board of directors.
Exhibits.The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.
| EXHIBIT NO. | DESCRIPTION | |
| 3.1 | Amendment to Articles of Incorporation, dated April 4, 2019 | |
| 31.1 | Certification of Chief Executive Officer and Acting Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 | |
| 32.1 | Certification of Chief Executive Officer and Acting Chief Financial Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| EX-101.INS | XBRL INSTANCE DOCUMENT* | |
| EX-101.SCH | XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT* | |
| EX-101.CAL | XBRL TAXONOMY EXTENSION CALCULATION LINKBASE* | |
| EX-101.DEF | XBRL TAXONOMY EXTENSION DEFINITION LINKBASE* | |
| EX-101.LAB | XBRL TAXONOMY EXTENSION LABELS LINKBASE* | |
| EX-101.PRE | XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE* |
* Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and otherwise are not subject to liability under those sections.
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MINING POWER GROUP, INC.CANNA CORPORATION
(Registrant)
Dated: March 13, 2019May 7, 2020
By:/s/ Dror SvoraiSacha Alessandro Ceruti ________
Dror SvoraiSacha Alessandro Ceruti
(Chief Executive Officer, Principal Executive
Officer, Acting Chief Financial Officer
and Principal Accounting Officer)