UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 2017March 31, 2018
Commission File Number: 50-11050
ELITE DATA SERVICES, INC. |
(Exact Name of Registrant as Specified in its Charter) |
Florida |
| 59-2181303 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
720 S. Colorado Blvd., PH North
Denver, CO 80246
(Address of principal executive offices)
(702) 240-9378
(Issuer's telephone number)
1550 Wewatta St.
Denver, CO 80202
(Former name or former address, if changed since last report)
Registrant's telephone number including area code: (702) 240-9378
Indicate by check mark whether the registrant (1) 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 such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Larger accelerated filer | o | Accelerated filer | o |
Non-accelerated filer | o | Smaller reporting company | x |
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of December 20, 2017,May 18, 2018, the Company had 205,450,287393,475,287 shares of common stock of the registrant outstanding.
Quarterly Report on Form 10-Q for the period ended September 30, 2017
Table of ContentsMarch 31, 2018
Part I – FINANCIAL INFORMATION
4 | |||||
4 | |||||
5 | |||||
6 | |||||
Notes to | 7 | ||||
| |||||
| 25 |
| |||
29 |
| ||||
|
31 |
| ||||
31 |
| ||||
Unregistered Sales of Equity Securities and Use of Proceeds. | 31 |
| |||
31 |
| ||||
31 |
| ||||
31 |
| ||||
| |||||
|
2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information included or incorporated by reference in this Report contains forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend"“may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or "project"“project” or the negative of these words or other variations on these words or comparable terminology. Among the material risks which may impact Forward Looking Statements are the following: the risk that we are unsuccessful in obtaining additional capital through the private sale of common shares, debt and/or convertible debt on commercially reasonable terms and which we require in order to fund the Company'sCompany’s business; the risk that we are unsuccessful in growing and developing our business, and the risk that our business does not perform to expectations, or does not operate profitably. The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, apply to forward-looking statements made by the Company. The reader is cautioned that no statements contained in this Report should be construed as a guarantee or assurance of future performance or results. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks described in this report and matters described in this report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. These forward-looking statements are based on current expectations, and the Company assumes no obligation to update this information. Readers are urged to carefully review and consider the various disclosures made by the Company in this Report and in the Company's other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of certain of the risks and factors that may affect the Company's business.
3 |
Table of Contents |
PART I – FINANCIAL INFORMATION
ELITE DATA SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
| September 30, |
| December 31, |
| |||||||||||
|
| 2017 |
| 2016 |
|
| March 31, 2018 |
|
| December 31, 2017 |
| |||||
|
| (unaudited) |
|
|
|
| (unaudited) |
|
| |||||||
ASSETS |
|
|
|
|
|
|
|
|
|
| ||||||
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
| ||||||
Cash |
| $ | 10 |
|
| $ | 540 |
|
| $ | - |
|
| $ | - |
|
Total Current Assets |
| 10 |
| 540 |
|
|
| - |
|
|
| - |
| |||
|
|
|
|
|
|
|
|
|
|
| ||||||
OTHER ASSET: |
|
|
|
|
| |||||||||||
OTHER ASSETS: |
|
|
|
|
| |||||||||||
WOD membership |
|
| 15,651 |
|
|
| 20,000 |
|
|
| 14,445 |
|
|
| 15,776 |
|
Total Assets |
| $ | 15,661 |
| $ | 20,540 |
|
|
| 14,445 |
|
|
| 15,776 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
| ||||||
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
| ||||||
Accounts payable and accrued liabilities |
| $ | 1,577,989 |
| $ | 958,784 |
|
| $ | 2,182,668 |
| $ | 1,963,632 |
| ||
Convertible notes from related party, net of discount $40,678 and $287,436, respectively |
| 408,822 |
| 150,064 |
| |||||||||||
Derivative instrument liability |
| 15,959,257 |
| 5,721,145 |
|
| 3,943,482 |
| 28,070,530 |
| ||||||
Convertible notes payable, net of discount of $66,162 and $583,840, respectively |
|
| 5,065,283 |
|
|
| 2,929,742 |
| ||||||||
Total Current Liabilities |
| 23,011,351 |
| 9,759,735 |
| |||||||||||
|
|
|
|
|
| |||||||||||
LONG TERM DEBT: |
|
|
|
|
| |||||||||||
Convertible note payable |
| - |
| 2,500,000 |
| |||||||||||
Convertible note payable, related party, net of discount $0 and $142,773, respectively |
|
| - |
|
|
| 69,227 |
| ||||||||
Note payable |
| 50,000 |
| 50,000 |
| |||||||||||
Convertible notes payable, net of discounts of $0 and $6,486, respectively |
|
| 5,522,895 |
|
|
| 5,521,806 |
| ||||||||
Total Liabilities |
| 23,011,351 |
| 12,238,962 |
|
| 11,699,045 |
| 35,605,968 |
| ||||||
|
|
|
|
|
| |||||||||||
STOCKHOLDERS’ DEFICIT: |
|
|
|
|
|
|
|
|
|
| ||||||
Preferred stock, $0.0001 par value; 500,000,000 shares authorized; issued and outstanding 1,100,000 and 2,100,000, respectively |
| 110 |
| 210 |
| |||||||||||
Common stock, $0.0001 par value; 10,000,000,000 shares authorized; issued and outstanding 150,018,799 and 136,518,799, respectively |
| 15,001 |
| 13,651 |
| |||||||||||
Preferred stock, $0.0001 par value; 500,000,000 shares authorized; issued and outstanding 1,100,000 |
| 110 |
| 110 |
| |||||||||||
Common stock, $0.0001 par value; 10,000,000,000 shares authorized; issued and outstanding 393,475,287 and 205,450,287, respectively |
| 39,348 |
| 20,545 |
| |||||||||||
Subscription stock not issued |
| 75,000 |
| 75,000 |
|
| 75,000 |
| 75,000 |
| ||||||
Additional paid-in capital |
| 17,991,386 |
| 22,783,785 |
| |||||||||||
Additional paid in capital |
| 17,978,272 |
| 17,990,747 |
| |||||||||||
Deficit accumulated |
|
| (41,077,187 | ) |
|
| (35,181,068 | ) |
|
| (29,777,330 | ) |
|
| (53,676,594 | ) |
Total Stockholders’ Deficit |
|
| (22,995,690 | ) |
|
| (12,308,422 | ) |
|
| (11,684,600 | ) |
|
| (35,590,192 | ) |
Total Liabilities and Stockholders’ Deficit |
| $ | 15,661 |
|
| $ | 20,540 |
|
| $ | 14,445 |
|
| $ | 15,776 |
|
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
4 |
Table of Contents |
ELITE DATA SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (unaudited)
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2018 |
|
| 2017 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
REVENUES |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
|
|
|
|
| |||||||||||||||||||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Consulting services |
| 30,000 |
| 70,000 |
| 140,000 |
| 90,000 |
|
| 30,000 |
| 80,000 |
| ||||||||||
Asset impairment |
| - |
| 480,000 |
| - |
| 5,380,000 |
| |||||||||||||||
Management services |
| - |
| 10,000,000 |
| - |
| 10,000,000 |
| |||||||||||||||
Investor relations services |
| - |
| - |
| - |
| 3,115 |
| |||||||||||||||
Accounting |
| 19,000 |
| - |
| 54,558 |
| - |
| |||||||||||||||
Wages |
| 39,750 |
| - |
| 89,750 |
| - |
|
| 41,750 |
| 11,250 |
| ||||||||||
General and administrative |
|
| 2,249 |
|
|
| 3,759 |
|
|
| 11,948 |
|
|
| 36,366 |
|
|
| 6,435 |
|
|
| 17,937 |
|
Total Operating Expenses |
| 90,999 |
| 10,553,759 |
| 296,256 |
| 15,509,481 |
|
|
| 78,185 |
|
|
| 109,187 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
LOSS FROM OPERATIONS |
|
| (90,999 | ) |
|
| (10,553,759 | ) |
|
| (296,256 | ) |
|
| (15,509,481 | ) |
|
| (78,185 | ) |
|
| (109,187 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Gain forgiveness of debt |
| - |
| 25,000 |
| - |
| 59,177 |
| |||||||||||||||
Amortization debt discount |
| (247,698 | ) |
| (555,574 | ) |
| (1,792,174 | ) |
| (846,882 | ) |
| (41,780 | ) |
| (1,118,668 | ) | ||||||
Initial derivative expense |
| (215,700 | ) |
| (259,422 | ) |
| (551,643 | ) |
| (259,422 | ) | ||||||||||||
(Loss) on derivative revaluation |
| (9,401,291 | ) |
| (284,282 | ) |
| (8,800,844 | ) |
| (1,409,275 | ) | ||||||||||||
Derivative expense |
| 24,162,342 |
| (2,808,659 | ) | |||||||||||||||||||
(Loss) on derivative settlement |
| - |
| (3,015 | ) |
| (6,623 | ) |
| (271,033 | ) |
| - |
| - |
| ||||||||
Gain on settlement or extinguishment of debt |
| - |
| - |
| 6,000,000 |
| 1,262,162 |
| |||||||||||||||
Gain on settlement of debt |
| - |
| 6,000,000 |
| |||||||||||||||||||
Interest expense – related party |
| (11,237 | ) |
| (20,000 | ) |
| (37,948 | ) |
| (87,165 | ) |
| - |
| (15,293 | ) | |||||||
Interest expense – other |
|
| (128,813 | ) |
|
| (150,460 | ) |
|
| (406,281 | ) |
|
| (472,745 | ) |
|
| (141,782 | ) |
|
| (148,835 | ) |
Total Other Expense |
| (10,004,739 | ) |
| (1,247,753 | ) |
| (5,595,513 | ) |
| (2,025,183 | ) | ||||||||||||
Total Other Income (Expense) |
|
| 23,978,780 |
|
|
| 1,908,545 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
NET LOSS |
| (10,095,738 | ) |
| (11,801,512 | ) |
| (5,891,769 | ) |
| (17,534,6644 | ) | ||||||||||||
NET GAIN (LOSS) BEFORE PROVISION FOR INCOME TAXES |
| 23,900,595 |
|
| 1,799,358 |
| ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Non-controlling interest |
|
| (1,610 | ) |
|
| - |
|
|
| (4,349 | ) |
|
| - |
|
|
| (1,331 | ) |
|
| (1,264 | ) |
COMPREHENSIVE LOSS BEFORE PROVISION FOR INCOME TAXES |
|
| (10,097,348 | ) |
|
| (11,801,512 | ) |
|
| (5,896,118 | ) |
|
| (17,534,664 | ) | ||||||||
PROVISION FOR INCOME TAX |
| - |
| - |
| - |
| - |
| |||||||||||||||
COMPREHENSIVE LOSS |
| $ | (10,097,348 | ) |
| $ | (11,801,512 | ) |
| $ | (5,896,118 | ) |
| $ | (17,534,664 | ) | ||||||||
COMPREHENSIVE GAIN (LOSS) BEFORE PROVISION FOR INCOME TAXES |
| 23,899,264 |
| 1,798,094 |
| |||||||||||||||||||
PROVISION FOR INCOME TAX (BENEFIT) |
|
| - |
|
|
| - |
| ||||||||||||||||
COMPREHENSIVE GAIN (LOSS) |
| $ | 23,899,264 |
|
| $ | 1,798,094 |
| ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Basic and Diluted Per Share Data: |
|
|
|
|
| |||||||||||||||||||
Net Loss Per Share - basic and diluted |
| $ | (0.06 | ) |
| $ | (0.09 | ) |
| $ | (0.04 | ) |
| $ | (0.16 | ) |
| $ | 0.09 |
|
| $ | 0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Weighted Average Common Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Basic and diluted |
|
| 150,018,799 |
|
|
| 132,285,614 |
|
|
| 142,255,063 |
|
|
| 109,276,487 |
|
|
| 274,325,009 |
|
|
| 136,518,799 |
|
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
5 |
Table of Contents |
ELITE DATA SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Nine Months Ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | (5,891,769 | ) |
| $ | (17,534,664 | ) |
Preferred stock issued for services |
|
| - |
|
|
| 10,000,000 |
|
Stock issued for accrued interest or penalties |
|
| 750 |
|
|
| 281 |
|
Forgiven interest and accounts payable to notes payable |
|
| - |
|
|
| 119,964 |
|
Asset impairment |
|
| - |
|
|
| 5,380,000 |
|
Loss derivative settlement |
|
| 6,623 |
|
|
| 271,033 |
|
Gain on settlement or extinguishment of debt |
|
| (6,000,000 | ) |
|
| (1,262,162 | ) |
Accounts payable to notes payable |
|
| 120,000 |
|
|
| - |
|
Initial derivative expense and derivative revaluation |
|
| 9,352,487 |
|
|
| 1,668,698 |
|
Amortization debt discount |
|
| 1,792,174 |
|
|
| 846,882 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses |
|
| - |
|
|
| - |
|
Accounts payable and accrued expenses |
|
| 619,205 |
|
|
| 477,191 |
|
Net cash (used in) operating activities |
|
| (530 | ) |
|
| (32,777 | ) |
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from convertible promissory notes, net |
|
| - |
|
|
| 32,000 |
|
Net cash received from financing activities |
|
| - |
|
|
| 32,000 |
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH |
|
| (530 | ) |
|
| (777 | ) |
CASH BEGINNING OF PERIOD |
| $ | 540 |
|
| $ | 1,730 |
|
CASH END OF PERIOD |
| $ | 10 |
|
| $ | 953 |
|
SUPPLEMENTAL DISCLOSURES: |
|
|
|
|
|
|
|
|
Income taxes paid |
| $ | — |
|
|
| — |
|
Interest paid |
| $ | — |
|
|
| — |
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of debt |
| $ | 1,447 |
|
| $ | 61,161 |
|
Issuance of common or preferred stock for services |
| $ | - |
|
|
| 10,000,000 |
|
|
| Three Months Ended March 31, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
OPERATING ACTIVITIES |
|
|
|
|
|
| ||
Net gain (loss) |
| $ | 23,900,595 |
|
| $ | 1,799,358 |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
(Gain) loss on debt settlement |
|
| - |
|
|
| (6,000,000 | ) |
Stock issued for accrued interest |
|
| 931 |
|
|
| 281 |
|
Cancellation preferred shares |
|
| - |
|
|
| 100 |
|
Accounts payable to notes payable |
|
| - |
|
|
| 120.000 |
|
Derivative expenses |
|
| (24,162,342 | ) |
|
| 2,808,659 |
|
Amortization debt discount |
|
| 41,780 |
|
|
| 1,118,668 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
| 219,036 |
|
|
| 153,014 |
|
Net cash used in operating activities |
|
| - |
|
|
| (201 | ) |
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH |
|
| - |
|
|
| (201 | ) |
CASH BEGINNING OF PERIOD |
|
| - |
|
|
| 540 |
|
CASH END OF PERIOD |
| $ | - |
|
| $ | 239 |
|
SUPPLEMENTAL DISCLOSURES: |
|
|
|
|
|
|
|
|
Income taxes paid |
| $ | - |
|
| $ | - |
|
Interest paid |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of debt |
| $ | - |
|
| $ | - |
|
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
6 |
Table of Contents |
ELITE DATA SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINETHREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2018
(Unaudited)
NOTE 1. DESCRIPTION OF BUSINESS
Elite Data Services, Inc., a Florida corporation (hereinafter the “Company”, “Our”, “We” or “Us”) is a retail focused management company which currently owns a 20% minority interest of WOD Market LLC, a Colorado limited liability company, a provider of intelligent retail solutions for gym owners and coaches, including the management of retail sales, up front inventory purchases, ongoing inventory management, payments, marketing, and related services. Under a joint venture agreement dated March 14, 2017, the Company co-operates WOD with WOD Holdings Inc. (“WODH”), a Delaware corporation majority owned by Brenton Mix, our Chief Executive Officer, and Taryn Watson, a related party.
Prior to March 14, 2017, the Company was a technology driven management company which owned and operated online marketing and gaming businesses: Elite Data Marketing LLC, and Elite Gaming Ventures LLC, from 2013 and 2014, respectively.
During the year ending December 31, 2016, we made limited progress with our online marketing platforms due to lack of funding to complete required programming and coding enhancements. During the year ending December 31, 2016, we anticipated obtaining additional funding which would have afforded us the ability of bringing certain new marketing offerings to our platforms in hopes of increasing traffic flow, capturing new users and generating revenues. Due to the Company not being a current and fully reporting company in 2016, the Company was unable to raise the capital needed to advance the online marketing business resulting in a loss of business opportunities.
On March 14, 2017, Company executed a note cancellation agreement and assignment with Baker & Myers & Associates LLC which resulted in Elite Data Marketing LLC no longer being a subsidiary of the Company, with no further operational effect or obligation to the Company.
Separately, pursuant to the terms of the Joint Venture with HYHI formed on or about May 18, 2016, we intended to implement the creation of the joint venture relationship using Elite Data Holdings S.A., a Honduras corporation, a wholly-owned subsidiary of Elite Gaming Ventures LLC, a Florida limited liability company ("EVG"), a wholly-owned subsidiary of the Company, and a distributor license from HYHI and El Mar Muerto Beauty Mineral, S.A., a Honduras corporation ("EMBM") to establish gaming operations (the "Purpose") by distributing and maintaining a total of eighty (80) slot machines in the cities of La Lima, Cortes; eighty (80) slot machines in the cities of TrujColon; and One Hundred and Sixty (160) slot machines in Roatan in the bay island of Honduras.
In order to effect the distributor license related to the gaming operations, the Company and EVG was responsible for providing any and all financial and operational resources required to execute on the license granted to the Company, including, but not limited to, the funding for the initial and ongoing operating costs in the minimum amount of Five Hundred Thousand Dollars (USD $500,000) on or before December 31, 2016 (the "Initial Funding").
During the period ending December 31, 2016, the Company was unable to raise the capital required to pay the minimum operational costs of the joint venture which resulted in a loss of business opportunities, and further strained the relationship with HYHI, our joint venture partner.
On March 14, 2017, Company executed a joint venture termination agreement with H Y H Investments S.A. which resulted in Elite Gaming Ventures LLC (and, its wholly-owned subsidiary, Elite Data Holdings S.A.) no longer being a subsidiary of the Company, with no further operational effect or obligation to the Company, except for certain amounts owed by the Company under a further amendment to the Amended and Restated Redeemable Note executed on May 18, 2016 at the time the Joint Venture was formed.
Separately, the Company intended to expand its operations in the fourth quarter of 2016 to include intelligent retail solutions for gym owners and coaches through the completion of the acquisition of WOD, as set forth in the definitive agreement dated August 26, 2016, at which time the Company acquired a minority interest stake of 20% of WOD, with 100% ownership interest of WOD anticipated to be completed on or before October 15, 2016.
WOD serves the fitness community by allowing coaches and trainers to focus on what’s important while athletes have access to the products they need to perform at their highest level. WOD aims to relieve gym owners and coaches of the burden of managing retail sales including upfront inventory purchases, ongoing inventory management, payments, marketing, etc. while also providing a service for members to have convenient access to products that help them perform better. WOD intends to forge a mutually beneficial relationship with each gym, customer and vendor to ensure the best possible experience.
On January 10, 2017, the Company executed the first amendment to the purchase of WOD to extend the second closing date from on or about September 15, 2016 to on or about March 31, 2017, and further extend the third and final closing date from on or about October 15, 2016 to on or about June 30, 2017, respectively.
Pursuant to management’s decision to divest itself from its online marketing and gaming businesses, and focus exclusively on the fitness retail sales business, the Company executed the second amendment to the definitive agreement on March 14, 2017, which further amended certain terms of the WOD purchase, including the formation of a joint venture to further develop and manage the current WOD business.
Under the terms of the Joint Venture, the initial ownership interest of WOD was 20% owned by the Company, with the remaining 80% owned WODH, with the option of Company to provide additional capital contributions to WOD in increments of not less than $10,000 up to a total of $8 million dollars in the aggregate, which included an equity exchange of up to a total of 800 units (80%) of WOD owned initially by WODH to the Company for a total of approximately 199,000 shares of Series B Preferred Stock and approximately 19,801,000 shares of Common Stock of the Company (the “Shares”) to be issued to WODH upon the completion of a final closing on or before December 31, 2018.
Until a minimum of at least $4 million in additional capital contributions have been made by the Company to WOD, resulting in a controlling ownership interest of not less than 60% of WOD by the Company, all the Shares of Company stock earmarked for the equity exchange with WODH is being held in a Voting Trust (as defined elsewhere in this filing), along with other key shareholder positions, in order to recapitalize the Company post a 1:1000 reverse split (which was previously approved), pending effectiveness after the Company becomes a current and fully-reporting public company. Our ability to complete subsequent phases of our newly developmentdeveloped business plan and operations are subject to us obtaining additional financing as these expenditures will exceed our cash reserves.
Today, we serve the fitness community marketing training products in fitness centers and gyms through automated retail solutions.
7 |
Table of Contents |
NOTE 2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Elite Data Services, Inc. (the "Company")the Company are presented in accordance with the requirements for Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles. In the opinion of management, all adjustments (all of which were of a normal recurring nature) considered necessary to fairly present the financial position, results of operations, and cash flows of the Company on a consistent basis, have been made. The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in our annual 10-K filing, filed with the SEC on December 19, 2017.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2016 have been omitted. May 21, 2018.
Going Concern
TheSince inception, the Company has accumulated a deficitcumulative net loss of $41,077,187.$29,777,330. The Company currently has only limited working capital with which to continue its operating activities. The amount of capital required to sustain operations is subject to future events and uncertainties. The Company must secure additional working capital through loans, sale of equity securities, or a combination, in order to implement its current business plans. There can be no assurance that such funding will be available in the future, or available on commercially reasonable terms favorable to the Company. These conditions raise substantial doubt about the Company's ability to continue as a going concern.
The accompanying condensed consolidated financial statements have been presented on the basis of the continuation of the Company as a going concern and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Management continued to manage its costs for the three months ended March 31, 2018 to ensure appropriate funding is on hand for its limited operations.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and include the accounts of the Company and its subsidiaries, Dynamic Energy Development Corporation and Transformation Consulting, Inc. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to intangible assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Table of Contents |
Reclassifications
Certain reclassifications have been made in Statement of Operations for the year 2017 to the period ended March 31, 2018. These reclassifications impacted the classification of certain items within the Statement of Operations: relating to classification of interest expense. The reclassifications had no impact on previously reported total operating expenses, net loss, or stockholders' deficit.
Development Costs
Development costs are expensed in the period they are incurred unless they meet specific criteria related to technical, market and financial feasibility, as determined by management, including but not limited to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project. If all criteria are met, the costs are deferred and amortized over the expected useful life, or written off if a product is abandoned. For the sixthree months ended September 30, 2017,March 31, 2018, the Company incurred no development costs. As of September 30, 2017,March 31, 2018, the Company had no deferred product development costs.
Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted the accounting standards codified in ASC 740, Income Taxes as of its inception. Pursuant to those standards, the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not that it will utilize the net operating losses carried forward in future years.
ASC 740-10-25 prescribes recognition thresholds that must be met before a tax position is recognized in the financial statements and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. An entity may only recognize or continue to recognize tax positions that meet a "more likely than not" threshold. Based on its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements.
The Company does not have any unrecognized tax benefits as of September 30, 2017March 31, 2018 that, if recognized, would affect the Company's effective income tax rate. The Company's policy is to recognize interest and penalties related to income tax issues as components of income tax expense. The Company did not recognize or have any accrual for interest and penalties relating to income taxes as of September 30, 2017March 31, 2018 and December 31, 2016.2017.
Cash and Cash Equivalents
Cash includeincludes all highly liquid instruments with an original maturity of three months or less at the date of purchase. At September 30, 2017,March 31, 2018, the Company had $10no cash and no other cash equivalents.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities, line of credit payable, loans from a related party, contingent consideration payable, and convertible note payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Revenue Recognition
The Company recognizes revenue in accordance with the FASB ASC Section 605-10-S99, Revenue Recognition, Overall, SEC Materials ("Section 605-10-S99"). Section 605-10-S99 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured.
Table of Contents |
Fair Value Measurement
The Company values its derivative instruments under FASB ASC 820 which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
Fair value is 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 (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
The Company's financial instruments consisted of cash, prepaid expense, deposit, accounts payable and accrued liabilities, line of credit, loan from stockholders and convertible debt. The estimated fair value of cash, prepaid expense, deposit, accounts payable and accrued liabilities, line of credit, loan from stockholders approximates its carrying amount due to the short maturity of these instruments. The recognition of the derivative values of convertible debt are based on the weighted-average Black-Scholes option pricing model.
Revenue Recognition
The Company recognizes revenue in accordance with the FASB ASC Section 605-10-S99, Revenue Recognition, Overall, SEC Materials ("Section 605-10-S99"). Section 605-10-S99 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured.
10 |
Table of Contents |
Impairment of Long-Lived Intangible Assets
We review our long-lived assets, including intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment, if any, is measured as the excess of the carrying amount over the fair value based on market value (when available) or discounted expected cash flows of those assets, and is recorded in the period in which the determination is made. Intangible assets not subject to amortization are tested annually for impairment and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.impaired
Net Income (Loss) Per Common Share
Basic loss per common share (“EPS”) is calculated by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The number of common shares that are exercisable or converted into common stock is not material to affecteffect diluted EPS results. Further, since the Company shows losses for the periods presented basic and diluted loss per share are the same for all periods presented.
Common Share Non-Monetary Consideration
In situations where common shares are issued and the fair value of the goods or services received is not readily determinable, the fair value of the common shares is used to measure and record the transaction. The fair value of the common shares issued in exchange for the receipt of goods and services is based on the stock price as of the earliest of the date at which:
Stock-Based Compensation
On December 1, 2005, the Company adopted the fair value recognition provisions codified in ASC 718, Compensation-Stock Compensation. The Company adopted those provisions using the modified-prospective-transition method. Under this method, compensation cost recognized for all periods prior to December 1, 2005 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of November 30, 2005, based on the grant-date fair value and b) compensation cost for all share-based payments granted subsequent to November 30, 2005, based on the grant-date fair value. In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital. The results for periods prior to December 1, 2005 were not restated.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from parties other than employees in accordance with ASC 505, Equity. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the counterparty.
Share Purchase Warrants
The Company accounts for common share purchase warrants at fair value in accordance with ASC 815,
Recently Issued Accounting Pronouncements
Other than as set forth below, management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
None.
NOTE 4. RELATED PARTY CONVERTIBLE PROMISSORY NOTE
Myers – Line of Credit (LOC)
On or about September 1, 2013, the Company and Sarah Myers, an individual (and, also the President, Chief Operating Officer and Director of the Company) ("Myers") executed that certain Revolving Line of Credit Agreement (the "LOC Agreement") for advances up to a total amount of USD$50,000 for the purposes of providing Company with working capital, as needed from time to time, as set forth in the executed Promissory Note (the "Myers Note") dated on even date therewith, in the original amount of USD $50,000 (collectively referred to as the "Original Myers Agreements"). The Original Myers Agreements were amended a total of
Sixth Amendment to Line of Credit
On May 18, 2016, the Company and Myers executed the Sixth Amendment to the LOC Agreement (the "Sixth Amendment"), pursuant to which the parties mutually agreed to cancel and otherwise terminate the effectiveness of the Original Myers Agreements dated September 1, 2013, as amended, whereby Myers would no longer extend any funds to the Company, pursuant to the terms of the Original Agreements, in exchange for the issuance of an amended and restated convertible redeemable note (the "Amended and Restated Note") in the principal amount of $175,000.00, at ten percent (10%) interest per annum commencing on January 1, 2016 (the "Effective Date"), due and payable to Myers by Company in seven (7) separate equal quarterly payments of Twenty-Fifty Thousand Dollars (USD $25,000), plus accrued interest to date, due on the first day of each quarter beginning on the date of the first quarter following the date of execution of this Note (each a "Maturity Date"), convertible into shares of the Company's common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, subject to aggregate conversion limitations of 4.99% and other terms and conditions set forth therein. The This note ceased to be from a
Baker Myers Note and Share Cancellation and Exchange Agreement
On May 18, 2016, the Elite Data Services, Inc. (the "Company") Company and Baker Myers and Associates LLC, a Nevada limited liability company ("Baker Myers," an entity owned by Sarah Myers, the President, Chief Operating Officer and Director of the On or about March 14, 2017, the Company and Baker & Myers & Associates LLC, a Nevada limited liability company ("Baker Myers," an entity owned by Sarah Myers, a former Secretary, Treasurer and Director of the Company) executed a Note Cancellation and Extinguishment Agreement (the “Note Cancellation Agreement”), pursuant to which Baker Myers (also herein referred to as “Releasor”) decided to exercise the entire Option Agreement for the acquisition of Elite Data Marketing LLC, a Florida limited liability company (the "EDM"), as set forth in the Share Exchange Agreement, dated May 18, 2016, in which Releasor agreed to forego and waive any and all right in, entitlement to or interest in any principal, interest, late charges, reimbursable attorneys’ fees, reimbursable expenses and any other sums due and payable with respect to a total of Two Hundred Thousand Dollars (US$200,000) of the final two (2) quarterly payments of the Redeemable Note dated May 18, 2016 (the “Cancelled Sum”), and any future payments due under the Cancelled Sum of the Redeemable Note and all or any other of Releasor’s rights under the Cancelled Sum of the Redeemable Note, thereby extinguishing and canceling the Cancelled Sum of the Redeemable Note and terminating any and all of Releasee’s obligations thereunder Cancelled Sum of the Redeemable Note, effective as of March 14, 2017 (the “Effective Date”), in exchange for the assignment and transfer by the Company of any and all of the issued and outstanding membership interests owned and held by Releasee representing a total of One Hundred Percent (100%) of the ownership interest of EDM to Releasor on the Effective Date (the “Cancellation Transaction”), pursuant to the Assignment of Membership Interests (the “Assignment”), attached as Exhibit A to the Note Cancellation Agreement, and including other terms and conditions set forth therein. The Cancellation Transaction and Assignment resulted in Elite Data Marketing LLC, which was The principal amount due on the Baker Myers Note at March 31, 2018 was $300,000. These amounts are unsecured and bear interest at the rate of 12% per annum. The accrued interest This note ceased to be from a related party with the resignation of Ms Myers in the first quarter of 2017.
NOTE 5. CONVERTIBLE PROMISSORY NOTES
JSJ Investments Inc.
On June 11, 2015, the Company issued a 12% Convertible Note (the “JSJ Note”) to JSJ Investments, Inc, (“JSJ”) in the principal amount of $100,000 receiving cash proceeds of $88,000 after payment of related legal and broker fees. The JSJ Note bears interest at the rate of 12% per annum, and was due December 11, 2015 (the “Maturity Date”). The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. Pursuant to ASC 815, “Derivatives and Hedging”. On the Maturity Date Company recognized a derivative liability of $91,388 based on the Black-Scholes pricing model and recorded a corresponding derivative loss of the same amount. JSJ is entitled to convert all the outstanding and unpaid principal amount of the Note into Common Stock at a 45% discount to the lowest trading price during the previous twenty (20) trading days to the date of the conversion notice. JSJ converted $14,417 of the
LG Capital Funding, LLC
On June 16, 2015, the Company issued a 6% Convertible Note (the “LG Note”) to LG Capital Funding, LLC (“LG”) in the principal amount of $52,500 receiving cash proceeds of $45,000 after payment or related legal and broker fees. The LG Note bears interest at the rate of 6% per annum and is due June 16, 2016 (the “Maturity Date”). The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. Pursuant to ASC 815, “Derivatives and Hedging. Based on the Black-Scholes pricing model, the Company recognized the fair value of the embedded conversion feature of $73,459 as a derivative liability on the date in which the note become convertible on December 16, 2015. The Company recorded a debt discount in the amount of $48,412 and a one day derivative expense of $25,047 in connection with the initial valuation of the derivative liability, to be amortized utilizing the effective interest method of accretion over the term of the Note. The conversion features of the note are at price equal to 58% of the lowest closing bid price of our common stock for the ten trading days on or prior to the date upon which notice of conversion is received. After the conversion date loan cannot be paid back in cash unless expressly permitted by LG Capital. As of March 31, 2016, the balances outstanding on the LG Note were principle of $42,239, accrued interest was $2,035 and the note discount was $23,845. At the time of the filing of this Report, LG Capital has converted a total of $10,261of the principal and interest of $281 into shares of the Company’s common stock, resulting in principal balance remaining of $42,239 and accrued interest of
Adar Bays, LLC
On June 16, 2015, the Company issued a 6% Convertible Note (the “Adar Note”) to Adar Bays, LLC (“Adar”) in the principal amount of $52,500 receiving cash proceeds of $45,000 after payment or related legal and broker fees. The Adar Note bears interest at the rate of 6% per annum and is due June 16, 2016 (the “Maturity Date”). The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. Pursuant to ASC 815, “Derivatives and Hedging. Based on the Black-Scholes pricing model, the Company recognized the fair value of the embedded conversion feature of $73,459 as a derivative liability on the date in which the note become convertible on December 16, 2015. The Company recorded a debt discount in the amount of $48,412 and a one day derivative expense of $25,047 in connection with the initial valuation of the derivative liability, to be amortized utilizing the effective interest method of accretion over the term of the Note. The conversion features of the note are at price equal to 58% of the lowest closing bid price of our common stock for the ten trading days on or prior to the date upon which notice of conversion is received. After the conversion date loan cannot be paid back in cash unless expressly permitted by Adar Bays, LLC. As of March 31, 2016, the balances outstanding on the Adar Note were principle of $14,787, accrued interest was $2,205 and the loan discount was $5,245. At
EMA Financial, LLC
On July 14, 2015, (the "Note Issuance Date"), the Company entered into a Securities Purchase Agreement (the "SPA") with EMA Financial, LLC ("EMA"), whereby EMA agreed to invest $156,500 (the "Note Purchase Price") in our Company in exchange for a convertible promissory note (the "Note"). The Company netted cash proceeds $135,000 after brokerage and legal fees aggregating $21,500 was disbursed at closing. Additionally, the Company issued to EMA 100,000 shares of Common Stock of the Company as a loan fee. Pursuant to the SPA, on July 14, 2015, we issued a convertible promissory note (the "Note") to EMA, in the original principal amount of $156,500 (the "Note Purchase Price"), which bears interest at 12% per annum. All outstanding principal and accrued interest on the Note is due and payable on the maturity date, which is July 14, 2016 (the " Maturity Date"). EMA may extend the Note Maturity Date by providing written notice at least five days before the Note Maturity Date. However, EMA may only extend the Note Maturity Date for up to an additional one-year period. Any amount of principal or interest that is due under the Note, which is not paid by the Note Maturity Date, will bear interest at the rate of 24% per annum until it is paid (the "Note Default Interest"). The Note is convertible by EMA into shares of our common stock at any time on the date which is six (6) months following the Issue Date ("Prepayment Termination Date"). At any time before the Prepayment Termination Date, the Company shall have the right, exercisable on not less than five (5) Trading Days prior written notice to EMA of this Note, to prepay the outstanding balance on this Note (principal and accrued interest), in full. The conversion price is the lower of: i) the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately preceding the closing date, and (ii) 60% of the lowest sale price for the Common Stock on the Principal Market during the 20 consecutive Trading Days immediately preceding the Conversion Date. EMA does not have the right to convert the Note into Common Stock if such conversion would result in EMA's beneficial ownership exceeding 4.9% of our outstanding Common Stock at that time.
Birch First Capital Fund, LLC
Litigation
On August 16, 2013, Birch First Capital Fund, LLC, a Delaware limited liability company, and/or Birch First Capital Management, LLC,
Settlement
On July 23, 2015, the Company and Birch First Capital Fund LLC (“Birch First Capital”), a Delaware limited liability company and Birch First Advisors LLC, a Delaware limited liability company (“Birch Advisors”), executed a Settlement and Stipulation Agreement (the “Settlement Agreement”) dated July 21, 2015, pursuant to which the parties dismissed, with no liability admitted or deemed to be admitted by any party, any and all claims that have been, or could have been, raised in the outstanding litigation between the parties (the “Litigation”).
On July 23, 2015, pursuant to the terms and conditions of the Settlement Agreement, the Company executed an amended and restated convertible debenture (the “Amended and Restated Note”) dated July 21, 2015 in the total amount of $300,000 bearing two percent (2%) interest per annum for a period of two years for the benefit of Birch First Capital. Pursuant to the terms of the Amended and Restated Note, $75,000 of the principal balance would be immediately converted at $0.10 per share for a total of 750,000 shares of the Company’s Common Stock issued within five (5) days from the date of execution of the Settlement Agreement. The remaining $225,000 in principal and interest of the Amended and Restated Note will be convertible on a quarterly basis in the amount of $37,500 into shares of the Company’s Common Stock at a share price equal to the lesser of $0.10 per share, or fifty percent (50%) of the three (3) lowest intraday trading average for the twenty (20) day trading period prior to each conversion date, until paid in full, with accrued and unpaid interested due and payable in the final payment, under certain terms and conditions set forth in the Amended and Restated Note. The Company recognized and expensed non-cash settlement fees aggregating $85,842.
The original note contains an embedded conversion option and is separated from the Note and accounted for as a derivative instrument at fair value and discount to the Note. Using the Black-Scholes option pricing model, the fair market value of the of the of the embedded conversion option at inception was determined to be $472,028 with the following assumptions: risk-free rate of interest of .711%, expected life of 2.0 years, expected stock price volatility of 175.371%, and expected dividend yield of zero. The initial carrying value of the embedded conversion option was $472,028 exceeded the note and $225,000 was attributed to the note discount and $247,028 to a one day derivative loss.
The parties agreed to amend certain parts of the Amended and Restated Note. As of December 31, 2015, Birch and the Company had not specified the terms of any such amendment, but, at the mutual agreement of the parties, no shares have been issued pursuant to the Amended and Restated Note. During 2017, Birch First Capital Fund LLC acquired an additional $1,500,000 of
Birch Advisors, LLC
On July 23, 2015, pursuant to the terms and conditions of the Settlement Agreement referenced herein, the Company executed a new Consulting and Advisory Agreement (the “Agreement”) dated July 21, 2015 with Birch Advisors, LLC (“Consultant”) for a period of twenty-four (24) months to commence upon the execution date of the signed Agreement, payable in the form of a convertible debenture (“New Note”) in the amount of $300,000 at two percent (2%) interest per annum for a period of two years. Pursuant to the Agreement, Consultant shall be paid $37,500 each quarter in the form of a reduction of the outstanding principal balance of the New Note, convertible into shares of the Company’s Common Stock at a share price equal to the lesser of $0.10 per share or a twenty-five (25%) discount of the three (3) lowest intraday trading average for the twenty (20) day trading period prior to each conversion date, until paid in full, with accrued and unpaid interest due and payable in the final payment.
The Consultant will perform advisory and consultation services to the Company, including, but not limited to, assisting Company’s management with general corporate operations, business development strategies, marketing and business plans, SEC compliance and advising the Company on other ad-hoc matters as appropriate. The parties agreed that either the Company
The original note contains an embedded conversion option and is separated from the Note and accounted for as a derivative instrument at fair value and discount to the Note. Using the Black-Scholes option pricing model, the fair market value of the of the of the embedded conversion option at inception was determined to be $84,267 with the following assumptions: risk-free rate of interest of .711%, expected life of 1.69 years, expected stock price volatility of 170.599%, and expected dividend yield of zero. The initial carrying value of the embedded conversion option was $84,267 and exceeded the note and $72,267 was attributed to the note discount and $12,000 was recorded one day derivative loss.
The parties agreed to amend certain parts of the New Note that would mutually benefit each party. As of December 31, 2015 the Consultant and the Company had not specified the terms of any such amendment, but, at the request of the Consultant, no shares have been issued pursuant to the New Note. Birch completed the services during the six months for the period ended December 31, 2015, and the parties have mutually agreed to not issue the shares payable at this time. The Note payable is accrued by quarter since it depends on the services being performed.
First Amendment to
On May 18, 2016, the Company and Birch First Capital Fund LLC ("Birch First Capital") and Birch First Advisors LLC ("Birch Advisors") executed the First Amendment to the Settlement Agreement (the "First Amendment"), pursuant to which the parties mutually agreed to amend and restate the amended and restated convertible debenture (the "Original Amended Note") in the original amount of USD $300,000 (the "Original Amended Note Amount"), the convertible debenture (the "Original New Note") in the original amount of USD $300,000 (the "Original New Note Amount") and the original consulting agreement (the "Original Consulting Agreement") dated on or about July 23, 2015, to reflect the following: (a) the execution of an Amended and Restated Convertible Redeemable Note (the "Amended and Restated Redeemable Note No.1") in the principal amount of USD $400,000, at a rate of ten percent (10%) per annum commencing on July 23, 2015, convertible into shares of the Company's common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, and other terms and conditions set forth therein, (b) the issuance by Company to Birch First Capital a three-year "cashless" stock purchase warrant (the "Warrant No.1") for the right to purchase a total of 4,000,000 shares of Series B preferred Stock of the Company (the "Preferred Warrant Shares"), at a purchase price of $0.001 per share, on the terms and conditions set forth therein, (c) the execution of an Amended and Restated Convertible Redeemable Note (the "Amended and Restated Redeemable Note No. 2") in the principal amount of USD $300,000, at a rate of ten percent (10%) per annum commencing on July 23, 2015, convertible into shares of the Company's common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, subject to aggregate conversion limitations of 4.99% and other terms and conditions set forth therein, (d) the execution of an Amended and Restated Consulting Agreement (the "Amended and Restated Consulting Agreement") on the terms and conditions set forth therein, including, but not limited to, for a period of twenty-four (24) months, with consideration payable to Birch Advisors and/or its assigns in cash in the amount of Ten Thousand Dollars ($10,000.00) per month, including, any and all payments set forth Amended and Restated Redeemable Note No.2, and the issuance by the Company to Birch First Advisors and/or assigns a three-year "cashless" stock purchase warrant (the "Warrant No.2") for the right to purchase up to 1,000,000 shares of common stock of the Company (the "Common Warrant Shares") each month a strike price of $0.001 per share (the "Exercise Price"), and (e) the acceptance by the Company of the execution of the Assignment of Amended and Restated Redeemable Note No.2 (hereinafter referred to as the "Assigned Note") between Birch Advisors and Birch First Capital, in which Birch Advisors agreed to assign the ownership interest of Assigned Note to Birch First Capital, on the terms and conditions set forth therein, of which the Company was not a party, however, provided consent at the request of Birch Advisors and Birch First In
Tarpon Bay Partners – Line of Credit
In conjunction with the Equity Line as discussed in Note 15 below, the Company issued a promissory note to Tarpon Bay Partners for $50,000, due on January 31, 2016, with 10% interest per annum as consideration for transaction costs incurred by Tarpon. The $50,000 of transaction costs will be treated as a note discount under current Generally Accepted Accounting Principles and the discount will be amortized as costs related to equity financing issuances. At
Convertible Redeemable Note for Unpaid Invoices
On May 18, 2016, the Company and JMS Law Group PLLC ("JMS") executed a settlement letter (the "Settlement Letter") in which the parties agreed to settle unpaid invoices for services rendered by JMS to the Company in the amount of $20,000, and further agreed to pay JSM a total of $7,500 for continued services to the Company until July 31, 2016.
Pursuant to the terms of the Settlement Letter, the Company issued to JMS a six month convertible redeemable note (the "Note") in the principal amount of USD $ 27,500, at a rate of ten percent (10%) per annum commencing on date of issuance , convertible into shares of the Company's common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, and other customary and standard terms and conditions set forth therein. At March 31, 2018, the note balance and accrued interest was
In 2017, Oscaleta Partners LLC acquired $100,000 of
Rimlinger Note
On or about January 10, 2017, the Company and Charles Rimlinger, an individual (the former Chief Executive Officer and Director of the Company) (the "Rimlinger") executed a Separation and Settlement Agreement (the “Rimlinger Settlement Agreement”), pursuant to the termination of his service as an officer and director of the Company, in exchange for the issuance of a one year Convertible Redeemable Note (the "Rimlinger Note") in the principal amount of USD $40,000, at a rate of ten percent (10%) per annum commencing on date of issuance, convertible into shares of the Company's common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, and other terms and conditions set forth therein. The Note balance and accrued interest at
Ricketts Note
On or about January 10, 2017, the Company and Dr. James G. Ricketts, an individual (the former Chairman of the Board and VP of Investor Relations of the Company) (the "Ricketts") executed a Separation and Settlement Agreement (the “Ricketts Settlement Agreement”) in which the parties terminated both the Contractor Agreement (“Ricketts Contractor”) dated on or about May 18, 2016, and the Board Member Service Agreement (“Ricketts Board Agreement”) dated on or about May 18, 2016, in exchange for the issuance of a one year Convertible Redeemable Note (the "Ricketts Note") in the principal amount of USD $40,000, at a rate of ten percent (10%) per annum commencing on date of issuance, convertible into shares of the Company's common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, and other terms and conditions set forth therein. The Note balance and accrued interest at
Antol Note On January 10, 2017, the Company and Stephen Antol, an individual (the former Chief Financial Officer, Secretary and Treasurer of the Company) (the "Ricketts") executed a Separation and Settlement Agreement (the “Settlement Agreement”) in which the parties terminated the Contractor Agreement (“Antol Contractor”) dated on or about May 18, 2016, in exchange for the issuance of a one year Convertible Redeemable Note (the "Antol Note") in the principal amount of USD $40,000, at a rate of ten percent (10%) per annum commencing on date of issuance, convertible into shares of the Company's common stock at a conversion price equal to the lesser of $0.01 per share or a a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, and other terms and conditions set forth therein. The Note balance and accrued interest at
WOD Note
On August 26, 2016, WOD Markets LLC advanced a total of Forty Thousand Dollars ($40,000) to DEAC for the purposes of funding the completion of DEAC’s audit and required SEC filings, secured by two (2) separately executed Convertible Redeemable Notes (“WOD Notes”). These notes bear no interest and are repayable should the acquisition of WOD Markets LLC fails to be completed within the terms of the amended purchase agreement and subsequent joint venture agreement that terminates if not funded December 31, 2018. At
NOTE 6. DERIVATIVE INSTRUMENT LIABILITIES
The fair market value of the derivative instruments liabilities at The entire amount of derivative instrument liabilities are classified as current due to the fact that settlement of the derivative instruments could be required within twelve months of the balance sheet date.
NOTE 7. FAIR VALUE MEASUREMENT
The Company values its derivative instruments under FASB ASC 820 which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
Fair value is 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 (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date.
Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
The Company's financial instruments consisted of cash, prepaid expense, deposit, accounts payable and accrued liabilities, line of credit, loan from stockholders and convertible debt. The estimated fair value of cash, prepaid expense, deposit, accounts payable and accrued liabilities, line of credit, loan from stockholders approximates its carrying amount due to the short maturity of these instruments. The recognition of the derivative values of convertible debt are based on the weighted-average Black-Scholes option pricing model, which the Company’s classifies as a level three of the fair value measurement hierarchy.
The derivative liabilities are measured at fair value using quoted market prices and estimated volatility factors based on historical quoted market prices for the Company's common stock, and are classified within Level 3 of the valuation hierarchy.
The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of
As of
NOTE 8. EQUITY INCENTIVE PLAN
Effective October 15, 2015, the Company adopted the Equity Incentive Plan (the “Plan”) whereby the Company may issue common stock, not to exceed 25,000,000 shares of common stock of the Company (the “ Stock Award ” or “ Stock Awards ”), or grant options to acquire common stock of the Company (the “ Option ” or “ Options ”), (the “ Stock ”), which may be in the form of Stock Awards, or “incentive stock options” (“ ISOs ”) intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “ Code ”), or “non-qualified stock options” (“ NQSOs ”).
Pursuant to the Plan, the exercise price of stock awards or options granted under the plan which are designated as NQSO’s shall not be less than 85% of the fair market value of the stock subject to the Option on the date of grant, and not less than 65% of the fair market value of the stock subject to the Stock Award on the date of grant. To the extent required by applicable laws, rules and regulations, the exercise price of a NQSO granted to any person who owns, directly or by attribution of stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or of any Subsidiary (a “Ten Percent Stockholder”) shall in no event be less than 110% of the fair market value of the stock covered by the Stock Award or Option at the time the Stock Award or Option is granted.
The fair market value is defined as the closing price of such stock on the date before the date the value is to be determined on the principal recognized securities exchange or recognized securities market on which such stock is reported. If selling prices are not reported, its fair market value shall be the mean between the high bid and low asked prices for such stock on the date before the date the value is to be determined (or if there are no quoted prices for such date, then for the last preceding business day on which there were quoted prices). If there is no established market for the stock, the fair market value will be determined in good faith by the Administer. The Administer will either be the Board of Directors or an Administer appointed by the Board of Directors. We do not have outstanding stock awards or options to purchase shares of our common stock under the Plan at
NOTE 9. STOCKHOLDERS’ DEFICIT
Authorized
The Company is authorized to issue 500,000,000 shares of preferred stock, having a par value of $0.0001 per share, and 10,000,000,000 shares of common stock, having a par value of $0.0001 per share.
Baker Myers Warrant Transfer – Voting Trust
On March 14, 2017, Baker Myers executed that certain Voting Trust Agreement, of which the Company approved, in which Baker Myers agreed to the assignment and transfer of the ownership interest of its stock purchase warrant (the “Warrant”) for the right to purchase a total of 3,000,000 shares of Series B Preferred Stock, owned and held by Baker Myers, to the Voting Trustee, which shall, thereafter, upon the completion by the Company of a reverse split of 1:1000 of its Common Stock, be simultaneously exercised and converted by the Company and Voting Trustee into a total of 30,000 of Series B Preferred Stock, and 2,970,000 shares of Common Stock, to be held by the Voting Trustee in the Voting Trust for the benefit of Baker Myers, in accordance with the terms of the Voting Trust Agreement (as described more fully herein).
Birch First Warrant Transfer – Voting Trust
On March 14, 2017, Birch First Capital Investments LLC (f/k/a Birch First Capital Fund LLC), a Delaware limited liability company (“Birch First Capital”) executed that certain Voting Trust Agreement, of which the Company approved, in which Birch First Capital agreed to the assignment and transfer of the ownership interest of its stock purchase warrant (the “Warrant”) for the right to purchase a total of 4,000,000 shares of Series B Preferred Stock, owned and held by Birch First Capital to the Voting Trustee, which shall, thereafter, upon the completion by the Company of a reverse split of 1:1000 of its Common Stock, be simultaneously exercised and converted by the Company and Voting Trustee into a total of 40,000 shares Series B Preferred Stock, and 3,960,000 shares of Common Stock, to be held by the Voting Trustee in the Voting Trust for the benefit of Birch First Capital, in accordance with the terms of the Voting Trust Agreement (as described more fully herein).
Ricketts and Antol Stock Transfer – Voting Trust
On or about March 14, 2017, Dr. James G. Ricketts, and Stephen Antol (each a Stockholder) executed a Voting Trust Agreement, which the Company approved in advance, in which each of the Stockholder, jointly and severally, agreed to each deposit with the Voting Trustee a total of 500,000 shares of Series B Preferred Stock (for a total of 1,000,000 shares), owned and held by each of them as Stockholders, as referenced in the execution of two (2) separate assignments, which shall, thereafter, upon the completion by the Company of a reverse split of 1:1000 of its Common Stock, be converted by the Company and Voting Trustee into a total of 5,000 shares of Series B Preferred Stock each (for total of 10,000 shares), and 495,000 shares of Common Stock each (for a total totaling 990,000 shares), to be held by the Voting Trustee in the Voting Trust for the benefit of each such Stockholder, in accordance with the terms of the Voting Trust Agreement (as described more fully herein).
Voting Trust - Change of Control
The deposit of the Series B Preferred Stock on March 14, 2017 from Ricketts and Antol into the Voting Trust creates a change of control with the Trustee having voting rights of 1,100,000,000 shares as a class pursuant to the preferences in the Series B Preferred Stock designation. This also makes the Voting Trust a related party.
At March 31, 2018, the Company
During the
Warrants Issued for Services
As of
NOTE 10.
On or about March 14, 2017, the Company WOD Holdings Inc., a Delaware corporation (“WODH”) executed a Joint Venture Agreement (the “Joint Venture Agreement”) pursuant to Exhibit I of the Amendment No. 2 to the Definitive Agreement (the “Amendment No. 2”), whereby the parties agreed to form a Joint Venture (the “Joint Venture”) to further develop and manage the current business of WOD Market LLC, a Colorado limited liability company, as a provider of intelligent retail solutions for gym owners and coaches, including the management of retail sales, up front inventory purchases, ongoing inventory management, payments, marketing, and related services. This Joint Venture Agreement began immediately upon signing on March 14, 2017.
Under the terms of the Joint Venture, the initial ownership interest of WOD was 20% owned by the Company, with the remaining 80% owned WODH, with the option of Company to provide additional capital contributions to WOD in increments of not less than $10,000 up to a total of $8 million dollars in the aggregate, which included an equity exchange of up to a total of 800 units (80%) of WOD owned initially by WODH to the Company for a total of approximately 199,000 shares of Series B Preferred Stock and approximately 18,801,000 shares of Common Stock of the Company (the “Shares”) to be issued to WODH upon the completion of a final closing on or before December 31, 2018, under the terms set forth in Amendment No. 2. The Joint Venture terminates at the earlier of the completion of the final closing equity exchange or December 31, 2018, whichever occurs first.
Until a minimum of at least $4 million in additional capital contributions have been made by the Company to WOD, resulting in a controlling ownership interest of not less than 60% of WOD by the Company, all the Shares of Company stock earmarked for the equity exchange with WODH
Contractor Agreements
On or about March 14, 2017, the Company and Brenton Mix, an individual (and, also the Chairman, Chief Executive Officer, President and Chief Financial Officer of the Company) (“Mix”) executed a Contractor Agreement (the "Mix Agreement") to formalize the engagement Mix (pursuant to his original appointment dated January 10, 2017) for his continued services to the Company and for such other services, as deemed necessary by the Board of Directors, from time to time, for a period of three (3) years from the date of execution, and renewal for two (2) successive one (1) year terms unless terminated early. The Company agreed to compensate Mix in the form of (a) a total of $10,000 per month for the first year, $12,500 per month for the second year, $15,000 per month for the third year, and $20,000 per month for subsequent terms, payable in cash or converted into restricted common stock of the Company, at Mix’s discretion, pursuant to the Company's Stock Option Plan then in effect, and (b) the right to participate in future stock options then in effect, including other terms and conditions set forth therein.
On or about March 14, 2017, the Company and Richard Phillips, an individual (and, also the Secretary, Treasurer and Director of the Company) (“Phillips”) executed a Contractor Agreement (the "Phillips Agreement") to formalize the engagement Phillips (pursuant to his original appointment dated January 10, 2107 and further appointment on March 14, 2017) for his continued services to the Company and for such other services, as deemed necessary by the Board of Directors, from time to time, for a period of two (2) years from the date of execution, and renewal for three (3) successive one (1) year terms unless terminated early. The Company agreed to compensate Phillips in the form of (a) a total of $1,250 per month for the first six months of the first year, $2,500 per month for the second six months of the first year, $5,000 per month for the second year and for subsequent terms, payable in cash or converted into restricted common stock of the Company, at Phillips’s discretion, pursuant to the Company's Stock Option Plan then in effect, and (b) the right to participate in future stock options then in effect, including other terms and conditions set forth therein.
On March 14, 2017, the Company accepted the resignation of Sarah Myers as the Secretary and Treasurer of the Company, effective immediately. Concurrently, on March 14, 2017, the Company appointed Richard Phillips as Secretary and Treasurer of the Company, in addition to his current position as a member of the Board of Directors of the Company. There was no disagreement between Ms. Myers and the Company.
NOTE
Subsequent to our
The following management’s discussion and analysis is intended to provide additional information regarding the significant changes and trends which influenced our financial performance for the
Forward-Looking Statements
This report contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including, "could" "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this Quarterly Report.
Company’s Approach to Management’s Discussion of Financial Condition and Results of Operations
In our discussion, we aim to provide: 1) a narrative explanation of our financial statements that enables investors to see the company through the eyes of our management; 2) an enhancement of the overall financial disclosure with provided context with which the financial information should be analyzed; and 3) information about the quality of, and potential variability of, our earnings and cash flow so investors can ascertain the likelihood that past performance is indicative of future performance. In our overall presentation, we aim to focus on the material, analysis, key performance measures and known material trends and uncertainness of the Company, disclosure regarding liquidity and capital resources, and disclosure regarding critical accounting estimates. As part of our overall presentation, we strive to present the most material information as the most prominent and avoid unnecessary duplicative disclosures that can tend to overwhelm our readers and act as an obstacle to identifying material matters.
Today, the Company is a retail focused management company which owns currently a 20% minority interest of WOD, under a joint venture agreement with WODH to provide intelligent retail solutions for gym owners and coaches, including the management of retail sales, up front inventory purchases, ongoing inventory management, payments, marketing, and related services.
Plan of Operations
WOD serves the fitness community by allowing coaches and trainers to focus on what’s important while athletes have access to the products they need to perform at their highest level. WOD aims to relieve gym owners and coaches of the burden of managing retail sales including upfront inventory purchases, ongoing inventory management, payments, marketing, etc. while also providing a service for members to have convenient access to products that help them perform better. WOD intends to forge a mutually beneficial relationship with each gym, customer and vendor to ensure the best possible experience.
Our ability to implement the phases of our business plan will be dependent on us obtaining the significant financing for these projects.
Requirements and Utilization of Funds
To implement our business plan, we will need to continue to raise working capital in an amount of at least $2,000,000 over the
At this time, management is unable to determine the specific amounts and terms of such future financings, or whether or not we will be successful in raising such funds on a basis acceptable to us.
To date, management has not identified the source for such additional capital, and whether the Company will be able to raise sufficient capital, and do so on commercially reasonable terms, is uncertain. If we cannot raise additional proceeds via a private placement of our common stock or secure debt financing, we would be required to cease business operations. As a result, investors in our common stock would lose all of their investment.
Going Concern
In their report for our
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles (“GAAP”) in the United States requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the financial statements and
We believe that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions. We have identified in
Results
Our operating results for the three months ended
Operating Expenses Our operating expenses for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 are as follows:
The decrease in operating expenses from 2017 to 2018 is primarily due to the Company’s changing business plan. The decrease of $31,002 is mainly comprised of a $50,000 consulting services from contractual services. The wage increase reflects new managements payroll that began with their agreements on January 10, 2017.
Liquidity and Capital Resources
As of As of March 31, 2018, we had cash of $0 and our working capital deficit was $35,590,192. As of March 31, 2018, we generated revenues of $0 and a net gain of $23,900,595 as compared to March 31, 2017 revenues of $0 and a net gain of $1,799,358. The net gain for the current period of measurement is mainly comprised of revaluation of derivatives. As of March 31, 2018, we have a cumulative net loss of $29,777,330. We are illiquid and need cash infusions from
The Company expects significant capital expenditures during the next 12 months, contingent upon raising additional capital. We anticipate that we will need $2,000,000 for operations for the next 12
The source of such capital is uncertain, and there is no assurance that the Company will be successful in obtaining such capital on commercially reasonable terms, or at all. We have a working capital deficit and will need cash infusions from investors and/or current shareholders to deploy our current business plan.
To implement our business plan, we will need to continue to raise working capital in the form of equity in an amount up to $2,000,000 over the twelve-month period ending December 31, 2018 on terms and conditions to be determined. If we were unable to raise any funds from the sale of equity, management may elect to seek subsequent interim or “bridge” financing in the form of debt as may be necessary.
At this time, management is unable to determine the specific amounts and terms of such future financings, or whether or not we will be successful in raising such funds on a basis acceptable to us. The source of such capital is uncertain, and there is no assurance that the Company will be successful in obtaining such capital on commercially reasonable terms, or at all. We are illiquid and need cash infusions from investors and/or current shareholders to deploy our current business plan.
Cash Flows - Operating Activities Cash provided by financing activities in the period ended March 31, 2018 is $0.
Going Concern Uncertainties
Management believes that our current financial condition, liquidity and capital resources will not satisfy our cash requirements for the next twelve months to deploy our current business plan, and as such we will need to either raise additional proceeds Management believes that we may generate more revenue within the next 12 months, but that these revenues will not satisfy our cash requirements to implement our current business plan, including, but not limited to, project acquisitions, engineering, and integration costs, and other operating expenses and corporate overhead, which is subject to change depending upon pending business opportunities and available financing.
We have no committed source for funds as of
It will be necessary to raise working capital funds through equity
The Company and has
Capital Expenditures
We have not incurred any
Off-Balance Sheet Arrangements
During the
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a “smaller reporting company” as defined by Rule 229.10(f)(1), we are not required to provide the information required by this Item 3.
ITEM 4. CONTROLS AND PROCEDURES.
The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management is responsible for establishing and maintaining adequate controls over financial reporting, and bases such evaluations on criteria established in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) updated 2013.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Act) that are designed to ensure that required information is recorded, processed, summarized and reported within the required time frame, as specified in rules set forth by the Securities and Exchange Commission. Based upon that evaluation and the material weakness described below, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective as of
In connection with the preparation of our financial statements for the three months ended
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control over Financial Reporting
In the fiscal quarter ended
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a15(f) and 15d15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company's internal control over financial reporting includes those policies and procedures that:
Smaller reporting companies are not required to provide disclosure pursuant to this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
None.
Those exhibits marked with an asterisk (*) refer to exhibits filed herewith. The other exhibits are incorporated herein by reference, as indicated in the following list.
** In accordance with SEC Release 33-8238, Exhibits 31.1 and 32.1 are being furnished and not filed.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|