look at all these convertible loans! no wonder this will neber run! he had to increase the A/S to 10 billion just to cover these toxic loans!!! now we getting it??
TCA Global Master Credit Fund, L.P.
On January 26, 2016, the Company issued the Convertible Note in favor of TCA Global Master Credit Fund, L.P. ("TCA"). The maturity date of the Convertible Note was June 18, 2016, and the Convertible Note bears interest at a rate of sixteen and one-half percent (16.5%) per annum. TCA has a first priority security interest on all property of the Company. The Convertible Note is convertible, at TCA's option upon an event of default, into shares of the Company’s common stock, par value $0.001 per share (the "Common Stock") at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the date of conversion. The Convertible Note may be prepaid in whole or in part at the Company’s option without penalty.
Furthermore, the Company shall pay $2,000 on the first day of each third month during the term. The fee shall increase by $500 for each subsequent line of credit increase with a cap of $2,500.
At any time and from time to time while this Convertible Note is outstanding, the principal and accrued interest may be, at the sole option of TCA upon an Event of Default, convertible into shares of the Company's common stock. The note is convertible into shares of common stock at a price equal to a variable conversion price of eighty-five percent (85%) of the volume-weighted averages the five (5) days preceding the date of conversion.
On March 31, 2017, the Company accepted and agreed to a debt purchase agreement, whereby Mammoth Corporation acquired $100,000 of convertible note payable interest in exchange for $115,000 (see Mammoth Corporation below).
The balance as of December 31, 2017 and March 31, 2017 amounted to $645,154 and $570,758 comprised of principal balance amounted to $500,000 and accrued interest of $145,154 and $70,758, respectively.
As of December 31, 2017, the nine-month term of the agreement has expired, and the obligations continues to be outstanding. The Company has accrued default interest at a rate of 18% as of December 31, 2016.
LG Capital Funding, LLC
On April 19, 2016, the Company entered into a convertible note payable with LG Capital Funding, LLC. The $40,700 note payable includes $5,700 of original issuance discount and financing costs and bears interest at a 8% per annum interest rate. The note matured on April 19, 2017 and may only be repaid within 180 days of issuance date with prepayment penalties ranging from 18% to 48% of principal. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty percent (60%) of the volume-weighted averages the twenty (20) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest and financing costs in the amount of $2,854 and $1,124 during the nine months ending December 31 2017, respectively. On October 28, 2016, the Company accepted and agreed to a debt purchase agreement, whereby Mammoth Corporation acquired the $40,700 convertible note payable and accrued interest in exchange for $68,743 (see Mammoth Corporate below).
On June 19, 2016, the Company entered into a convertible note payable with LG Capital Funding, LLC. The $40,700 note payable includes $5,700 of original issuance discount and financing costs and bears interest at an 8% per annum interest rate. The note matured on June 19, 2017 and may only be repaid within 180 days of issuance date with prepayment penalties ranging from 18% to 48% of principal. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty percent (60%) of the volume-weighted averages the twenty (20) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $1,041 and $219 during the nine months ending December 31, 2016, respectively.
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Mammoth Corporation
On November 18, 2015, the Company entered into a convertible note payable with Mammoth Corporation. The $17,300 note payable note is due upon the Company closing a debt or equity transaction in excess of $100,000 and no further interest shall accrue as long as the note is not in default. The note is due on demand and the default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty-five percent (65%) of market price. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. In the nine months ended December 31, 2017, the lender converted the $7,638 of principal in exchange for 4,700,000 shares common stock payable at a fair market value of $16,450 and recorded an extinguishment of debt expense of $8,812. The principal balance as of December 31, 2017 and March 31, 2017 amounted to $2,349 and $9,987, respectively.
On July 29, 2016, the Company entered into a convertible note payable with Mammoth Corporation. The $27,500 note payable includes $6,000 of original issuance discount. The note is due upon the Company closing a debt or equity transaction in excess of $100,000 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of 300,000 shares of the Company common stock which upon settlement of the debt are to be returned to the Company. The reserve shares are not accounted for as issued. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the five (5) lowest closing price averages the fifteen (15) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The balance as of December 31, 2017 and March 31, 2017 amounted to $27,500 and $18,459 comprised of principal balance amounted to $27,500 net of remaining debt discount of $0 and $6,740 and original issue discount of $0 and $2,301, respectively.
On September 28, 2016, the Company entered into a convertible note payable with Mammoth Corporation. The $50,000 note payable includes $13,190 of original issuance discount. The note payable includes advances to the Company of $7,500 on September 28, 2016, additional advances of $8,040 in October 2016 and $2,300 on January 17, 2017. The note is due upon the Company closing a debt or equity transaction in excess of $100,000 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the issuance of 300,000 shares of the Company common stock. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the lowest market price one year preceding the date of the conversion notice. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $14,575 and $6,675 during the nine months ended December 31, 2017, respectively. The balances as of December 31, 2017 and March 31, 2017 amounted to $50,000 and $28,751 comprised of principal balance amounted to $50,000 net of remaining debt discount of $0 and $14,575 and original issue discount of $0 and $6,675, respectively.
On October 28, 2016, the Company entered into a $68,743 convertible note payable with Mammoth Corporation. The note payable is a balance of $62,493 of principal and accrued interest assigned from the April 29, 2016 LG Capital Funding, LLC note payable and includes $6,250 of original issuance discount. The note is due one year upon issuance October 28, 2017 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty percent (60%) of market price nine months preceding the date of the conversion notice. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $7,775 and $3,613 during the nine months ended December 31, 2017, respectively. The balance as of December 31, 2017 and March 31, 2017 amounted to $68,743 and $57,356 comprised of the principal balance in the amount of $68,743 net of remaining debt discount of $0 and $7,775 and original issue discount of $0 and $3,613, respectively.
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On March 31, 2017, the Company entered into a $115,000 convertible note payable with Mammoth Corporation. The note payable is a balance of $100,000 of interest assigned from the November 18, 2016 TCA note payable and includes $10,000 of original issuance discount and $5,000 in financing costs. The note is due one year upon issuance March 31, 2018 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the lowest market price one year preceding the date of the conversion notice. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $105,000 and $10,000 during the nine months ended December 31, 2017, respectively. In the nine months ended December 31, 2017, the lender converted the $114,775 of principal into 117,878,843 shares of common stock at a fair market value of $386,761 and recorded an extinguishment of debt expense of $271,986. The balance as of December 31, 2017 and March 31, 2017 amounted to $8,488 and $0 comprised of principal balance amounted to $225 and $115,000 and accrued interest of $8,263 and $0, net of remaining debt discount of $0 and $105,000 and original issue discount of $0 and $10,000, respectively.
On July 14, 2017, the Company entered into a convertible note payable with Mammoth Corporation. The $112,222 note payable includes $10,202 of original issuance discount and $102,020 of net proceeds were paid directly to repay the Auctus Fund, LLC noted dated February 2, 2017. The note is due one year upon issuance July 14, 2018 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of market price for a one-year period preceding the conversion notice, or the closing bid price on the last day of the pricing period. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $47,516 and $4,751 during the nine months ended December 31, 2017, respectively. In the nine months ended December 31, 2017, the lender converted the $8,325 of principal into 18,500,000 shares of common stock at a fair market value of $22,200 and recorded an extinguishment of debt expense of $13,875. The balance as of December 31, 2017 amounted to $43,915 comprised of principal balance amounted to $103,897, net of remaining debt discount of $54,504 and original issue discount of $5,478.
On August 18, 2017, the Company entered into a convertible note payable with Mammoth Corporation. The $49,500 note payable includes $4,500 of original issuance discount and net cash proceeds of $45,000. The note is due one year upon issuance August 18, 2018 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the lowest market price one year preceding the date of the conversion notice. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $16,645 and $1,665 during the nine months ended December 31, 2017, respectively. The balance as of December 31, 2017 amounted to $18,308 comprised of principal balance amounted to $49,500 and accrued interest of $0, net of remaining debt discount of $28,356 and original issue discount of $2,836.
On September 12, 2017, the Company entered into a convertible note payable with Mammoth Corporation. The $125,000 note payable includes $25,000 of original issuance discount and $100,000 of net proceeds were paid directly towards the Pirate Oil acquisition. The note is due one year upon issuance September 12, 2018 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of market price for a one-year period preceding the conversion notice, or the closing bid price on the last day of the pricing period. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $28,371 and $7,093 during the nine months ended December 31, 2017, respectively. The balance as of December 31, 2017 amounted to $35,464 comprised of principal balance amounted to $125,000, net of remaining debt discount of $71,629 and original issue discount of $17,907.
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On September 22, 2017, the Company entered into a convertible note payable with Mammoth Corporation. The $18,000 note payable includes $3,500 of original issuance discount, $9,500 of cash proceeds and $5,000 related to the deposit on pending acquisition. The note is due on demand and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of market price for a one year period preceding the conversion notice, or the closing bid price on the last day of the pricing period. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of nine-months. The Company recorded amortization of debt discount and original discount interest in the amount of $8,011 and $2,210 during the nine months ended December 31, 2017, respectively. The balance as of December 31, 2017 amounted to $10,221 comprised of principal balance amounted to $18,000, net of remaining debt discount of $6,489 and original issue discount of $1,290.
On October 3, 2017, the Company entered into a $70,000 convertible note payable with Mammoth Corporation. The note payable is a balance of $52,500 of principal and related interest assigned from the CrownBridge Capital March 29, 2017 note payable of $35,000 and includes $17,500 of original issuance discount. The note is due one year upon issuance October 3, 2018 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the lowest market price one year preceding the date of the conversion notice. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $8,342 and $2,781 during the nine months ended December 31, 2017, respectively. The balance as of December 31, 2017 amounted to $17,068 comprised of principal balance amounted to $70,000, net of remaining debt discount of $13,233 and original issue discount of $39,699, respectively.
On November 14, 2017, the Company entered into a convertible note payable with Mammoth Corporation. The $85,000 note payable includes $18,337 of original issuance discount. The note payable includes advances to the Company of $23,000 in November 2017 and additional advances of $62,000 in December 2017. The note is due on demand and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of market price for a one year period preceding the conversion notice, or the closing bid price on the last day of the pricing period. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of nine-months. The Company recorded amortization of debt discount and original discount interest in the amount of $8,584 and $2,361 during the nine months ended December 31, 2017, respectively. The balance as of December 31, 2017 amounted to $10,945 comprised of principal balance amounted to $85,000, net of remaining debt discount of $58,079 and original issue discount of $15,976.
On November 30, 2017, the Company entered into a $96,358 convertible note payable with Mammoth Corporation. The note payable is a balance of $49,875 of principal and related interest assigned from the CrownBridge Capital March 29, 2017 note payable and includes $16,060 of original issuance discount. The note is due one year upon issuance November 30, 2018 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the lowest market price one year preceding the date of the conversion notice. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $6,920 and $1,364 during the nine months ended December 31, 2017, respectively. The balance as of December 31, 2017 amounted to $8,184 comprised of principal balance amounted to $96,358, net of remaining debt discount of $73,478 and original issue discount of $14,696, respectively.
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Auctus Fund, LLC
On January 31, 2017, the Company entered into a convertible note payable with Auctus Fund, LLC. The $65,000 note payable includes $8,750 of original issuance discount and net cash proceeds of $56,250. The note is due one year upon issuance November 1, 2017 and bears interest at a 12% rate per annum. The note is collateralized by the reservation of shares of the Company common stock equivalent to 700% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the volume-weighted averages the twenty-five (25) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $47,312 and $7,360 during the nine months ended December 31, 2017, respectively. The balance as of December 31, 2017 and March 31, 2017 amounted to $0 and $11,567 comprised of principal balance amounted to $65,000 and accrued interest of $0 and $1,239 and net of remaining debt discount of $0 and $47,312 and original issue discount of $0 and $7,360, respectively. On July 14, 2017, the Company accepted and agreed to a debt purchase agreement, whereby Mammoth Corporation acquired the $65,000 convertible note payable and accrued interest in exchange for $112,222 which included $32,000 of penalty fees (see Mammoth Corporation above).
Crown Bridge Partners
On March 29, 2017, the Company entered into a convertible note payable with Crown Bridge Partners, LLC up to $105,000 in principal. On March 31, 2017, the Company entered into a $35,000 tranche including $6,000 of original issuance discount and $2,000 of financing costs, on May 19, 2017 a $49,875 tranche including $5,000 of original issuance discount and net proceeds of $44,875 and on October 31, 2017 a final tranche of $20,125 including $7,000 of original issuance discount and net proceeds of $13,125. The note is due one year upon issuance of each tranche and bears interest at a 12% rate per annum. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the volume-weighted averages the twenty-five (25) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $30,920 and $5,338 during the nine months ended December 31, 2017, respectively. The balance as of December 31, 2017 and March 31, 2017 amounted to $3,767 and $192 comprised of a principal balance amounted of $20,125 and $35,000 and accrued interest of $404 and $23 and net of remaining debt discount of $10,932 and $28,841 and original issue discount of $5,830 and $5,967, respectively.
On October 3, 2017 and November 30, 2017, the Company accepted and agreed to a debt purchase agreement, whereby Mammoth Corporation acquired an aggregate $87,875 convertible note payable and accrued interest in exchange for $132,798 which included $42,456 of penalty fees (see Mammoth Corporation above).
The balance as of December 31, 2017 and March 31, 2017 amounted to $3,767 and $192 comprised of a principal balance amounted of $20,125 and $35,000 and accrued interest of $404 and $23 and net of remaining debt discount of $10,932 and $28,841 and original issue discount of $5,830 and $5,967, respectively.
In conjunction with the Crown Bridge, LLC convertible note payable, the first tranche of the $35,000 convertible note was issued with a 5-year-term warrant to purchase 1,750,000 shares of the Company’s common stock at an exercise price of $0.02. The second tranche of the $49,875 convertible note was issued with a 5-year-term warrant to purchase 2,493,750 shares of the Company’s common stock at an exercise price of $0.02. The final tranche of the $20,125 convertible note was issued with a 5 year-term warrant to purchase 1,006,250 shares of the Company’s common stock at an exercise price of $0.02. The anti-dilution adjustments to exercise price is entitled if an issuance is less than the current exercise price whereby the (a) the exercise price shall be adjusted to match the lowest price per share and (b) the number of warrant shares shall be increased to the amount equal to the number of shares for the aggregate exercise price of $105,000. As of December 31, 2017, the anti-dilution warrants convertible to common stock amounted to 54,379,060.
On November 17, 2017, the Company entered into a convertible note payable with Crown Bridge Partners, LLC up to $100,000 in principal. On November 17, 2017, the Company entered into a $25,000 tranche including $2,500 of original issuance discount. The note is due one year upon issuance of each tranche and bears interest at a 12% rate per annum. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the volume-weighted averages the twenty-five (25) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $2,712 and $301 during the nine months ended December 31, 2017, respectively. The balance as of December 31, 2017 amounted to $3,376 comprised of a principal balance amounted of $25,000 and accrued interest of $362 and net of remaining debt discount of $19,787 and original issue discount of $2,198, respectively.
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In conjunction with the Crown Bridge, LLC convertible note payable, the first tranche of the $25,000 convertible note was issued with a 5-year-term warrant to purchase 1,250,000 shares of the Company’s common stock at an exercise price of $0.02. The anti-dilution adjustments to exercise price is entitled if an issuance is less than the current exercise price whereby the (a) the exercise price shall be adjusted to match the lowest price per share and (b) the number of warrant shares shall be increased to the amount equal to the number of shares for the aggregate exercise price of $25,000.
GS Capital Partner, LLC
On May 12, 2017, the Company entered into a convertible note payable with GS Capital Partners, LLC. The $51,700 note payable, includes $4,700 of original issuance discount and net cash proceeds of $47,000, and bears interest at a 8% per annum interest rate. The note matures on May 12, 2018. The note is collateralized by the reservation of shares of the Company common stock equivalent to 400% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty percent (60%) of the volume-weighted averages the fifteen (15) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $36,381 and $4,262 during the nine months ended December 31, 2017, respectively. In the nine months ended December 31, 2017, the lender converted the $19,400 of principal and $967 of accrued interest into 36,590,560 shares of common stock at a fair market value of $42,478 and recorded an extinguishment of debt expense of $22,218. The balance as of December 31, 2017 amounted to $23,390 comprised of principal balance $32,300 and accrued interest of $2,771, net of remaining debt discount of $10,619 and original issue discount of $1,062, respectively.
Adar Bays
On April 25, 2017, the Company entered into a convertible note payable with Adar Bays, LLC. The $50,000 net cash proceeds received in the note payable bears interest at a 12% per annum interest rate. The note is collateralized by the reservation of shares of the Company common stock of 40,000,000 shares. The note matures on April 25, 2018. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the lowest trading price for the twenty-five (25) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount in the amount of $41,738 during the nine months ended December 31, 2017. In the nine months ended December 31, 2017, the lender converted the $23,778 of principal into 59,776,722 shares of common stock at a fair market value of $61,772 and recorded an extinguishment of debt expense of $37,994. The balance as of December 31, 2017 amounted to $26,222 comprised of principal balance $26,222 and accrued interest of $3,904, net of remaining debt discount of $8,262.
Chestnut Hill Capital
On October 20, 2017, the Company entered into a convertible note payable with Chestnut Hill Capital, LLC $11,000 note payable bears interest at a 10% per annum interest rate. The note matures on October 20, 2018. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the lowest volume-weighted average of the twenty-five (25) days preceding the date of conversion. The note is collateralized by the reservation of shares of the Company common stock equivalent to 400% of convertible shares. The Company recorded amortization of debt discount in the amount of $2,170 during the nine months ended December 31, 2017. The balance as of December 31, 2017 amounted to $2,430 comprised of principal balance $11,000 and accrued interest of $260, net of remaining debt discount of $8,830.
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NOTE 6 — RELATED PARTIES
Advances
From time to time, the Company has received advances from certain of its officers and shareholders to meet short-term working capital needs. For the years ended December 31, 2017 and March 31, 2017, a total of $30,324 and $24,917 advances from related parties is outstanding, respectively. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.
Officer Agreements
On January 28, 2016, the Company entered into an employment agreement, effective February 15, 2016, with the Company's Chief Executive Office whereby the Company provides for compensation of $10,000 per month. A total salary of $90,000 was expensed during the nine months ended December 31, 2017 and 2016. The total balance due to the Chief Executive Officer for accrued salaries at December 31, 2017 and March 31, 2017, was $103,910 and $95,010, respectively.
Office Lease
An office space is furnished on a month by month basis by the Chief Executive Officer.
NOTE 7 – EQUITY
Common shares
The Company had authorized 2,499,000,000 and on February 12, 2018 increased the authorized common shares to 9,999,000,000 The Company had 460,312,717 and 89,960,093 common shares issued and outstanding, as of December 31, 2017 and March 31, 2017, respectively. The common shares entitle the holder thereof to one vote per share on all matters coming before the shareholders of our company for a vote.
On February 6, 2017, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) that had the effect of changing the name of the corporation to Elite Group, Inc. and designating 999,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Company’s board of directors.
On September 5, 2017, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) that had the effect of designating 2,499,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Company’s board of directors.
On February 12, 2018, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) that had the effect of designating 9,999,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Company’s board of directors (See Note 11).
The Company issued the following equity instruments during the nine months ended December 31, 2017:
In the nine months ending December 31, 2017, the Mammoth Capital converted $130,738 of principal balance of convertible notes payable and issued $11,250 of common stock payable as of March 31, 2017 into 141,078,843 shares of common stock.
On April 26, 2017, the Company entered into a Settlement Agreement and Stipulation (the “Settlement Agreement”) with Rockwell Capital Partners, Inc. (“Rockwell”), pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $46,000 (the “Settlement Amount”) of past-due obligations and accounts payable of the Company. Rockwell purchased the obligations and accounts payable from certain vendors of the Company. The Company issued 26,436,500 Settlement shares to Rockwell to reduce the $46,000 outstanding liability and recorded a loss on settlement of accounts payable of $79,708.
In conjunction with the settlement agreement, the Company issued 4,000,000 shares of common stock at a fair market value of $23,200 to Rockwell for fees related to the Settlement Agreement.
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In the nine months ending December 31, 2017, the Adars Bay converted $23,778 of principal balance of convertible notes payable into 59,776,722 shares of common stock.
In the nine months ending December 31, 2017, the Crown Bridge Capital exercised 93,324,785 warrants valued at $66,664, or $0.007 per warrant. The cashless warrants were exercised into 54,379,060 shares of common stock.
In the nine months ending December 31, 2017, the GS Capital converted $19,400 of principal balance and $967 of interest of convertible notes payable into 36,590,591 shares of common stock.
On May 23, 2017, the Company entered into a Settlement Agreement and Stipulation (the “Settlement Agreement”) with Group 10 Holdings, LLC. (“Group 10”), pursuant to which the Company agreed to issue common stock to Group 10 in exchange for the settlement of $55,000 (the “Settlement Amount”) of past-due obligations and accounts payable of the Company. Group 10 purchased the obligations and accounts payable from certain vendors of the Company. In the nine months ended December 31, 2017, the Company issued 48,090,909 Settlement shares to Group 10 to reduce $55,000 of outstanding liabilities and recorded a loss on settlement of accounts payable of $65,092.
Preferred shares – Series A
The Company has designated 1,000 shares of preferred stock as Series A Preferred Stock (“Series A”). The holder of the Series A Preferred shall not be entitled to receive dividends. Upon liquidation each shareholder of Series A Preferred shall be entitled to receive a preferential distribution in the amount of $1.00 per share of each Series A. For so long as Series A is issued and outstanding, the holders of Series A shall vote together as a single class with the holders of the Company’s common stock with the Series A holders entitled to fifty-one percent (51%) of the total votes on all matters. The Company issued the Series A to the Company’s Chief Executive Officer on January 25, 2017.
NOTE 8 – FAIR VALUE OF FINANCIAL INSTRUMENTS
Disclosures about fair value of financial instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of December 31, 2017, the amounts reported for cash, accrued interest and other expenses, notes payables, and derivative liability approximate the fair value because of their short maturities.
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. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
?
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
?
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
?
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
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We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at December 31, 2017:
Total
(Level 1)
(Level 2)
(Level 3)
Liabilities
Derivative and warrant liability
$
-
$
-
$
-
$ 3,938,130
Total liabilities measured at fair value
$
-
$
-
$
-
$ 3,938,130
We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2017:
Total
(Level 1)
(Level 2)
(Level 3)
Liabilities
Derivative and warrant liability
$
-
$
-
$
-
$
1,351,129
Total liabilities measured at fair value
$
-
$
-
$
-
$
1,351,129
The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:
Beginning balance as of March 31, 2017
$
1,351,129
Day one loss on derivative liability
1,467,605
Debt discount
650,481
Reclassification of derivative liability to paid-in capital
(514,681)
Loss on change in derivative liability
983,596
Ending balance as of December 31, 2017
$
3,938,130
Convertible Debentures
The derivative liabilities related to the embedded conversion feature were valued using the Black-Scholes option valuation model and the following assumptions on the following dates:
December 31, 2017
Embedded Conversion Feature
Risk free interest rate
1.03% to 1.24%
Expected volatility (peer group)
288.23% to 354.82%
Expected life (in years)
0.5 to 1.00
Expected dividend yield
-
Number outstanding
595,620,941
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NOTE 9 — COMMITMENTS AND CONTINGENCIES
The Company neither owns nor leases any real or personal property. An office space has been leased on a month by month basis.
The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
Consulting Agreements
On December 18, 2015, the Company entered into an advisory services agreement with TCA Global Master Fund (“Consultants”) for investment banking services. In consideration, the Company shall issue the Consultant $250,000 in the form of restricted shares of the Company common stock. The issuance of shares are subject to an anti-dilution share issuances to the extent the cash proceeds from the share issuances are inadequate to satisfy the $250,000 fee. The Company issued 139,750 shares of common stock at closing valued at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the agreement date. As of December 31, 2017, an additional issuance of 45,454,545 shares with a fair market value of $249,931 are required to satisfy the advisory agreement whereby an additional financing costs has been recorded to common stock payable. The Company recorded $1,063 and $101,995 of advisory services stock-based financing costs for the nine months ended December 31, 2017 and 2016, respectively.
Settlement Agreement with Rockwell Capital Partners
On April 26, 2017, the Company entered into a Settlement Agreement and Stipulation (the “Settlement Agreement”) with Rockwell Capital Partners, Inc. (“Rockwell”), pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $46,000 (the “Settlement Amount”) of past-due obligations and accounts payable of the Company. Rockwell purchased the obligations and accounts payable from certain vendors of the Company.
On April 26, 2017, the Circuit Court of the Twelfth Judicial Circuit for Manatee County, Florida (the “Manatee Court”), entered an order (the “Rockwell Order”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), in accordance with a stipulation of settlement, pursuant to the Settlement Agreement between the Company and Rockwell. The Company issued 26,436,500 Settlement shares to Rockwell to reduce certain outstanding liabilities through May 11, 2017 resulting in a loss on debt extinguishment of $79,708. In conjunction with the settlement agreement, the Company issued 4,000,000 shares of common stock at a fair market value of $23,200 to Rockwell for fees related to the Settlement Agreement.
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Settlement Agreement with Group 10 Holdings, LLC.
On May 23, 2017, the Company entered into a Settlement Agreement and Stipulation (the “Settlement Agreement”) with Group 10 Holdings, LLC. (“Group 10”), pursuant to which the Company agreed to issue common stock to Group 10 in exchange for the settlement of $55,000 (the “Settlement Amount”) of past-due obligations and accounts payable of the Company. Group 10 purchased the obligations and accounts payable from certain vendors of the Company.
On June 19, 2017, the Circuit Court of the Miami-Dade County, Florida, entered an order (the “Group 10”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), in accordance with a stipulation of settlement, pursuant to the Settlement Agreement between the Company and Group 10. The transactions was not settled as of December 31, 2017. The Company issued 47,090,909 Settlement shares to Group 10 to reduce certain outstanding liabilities through November 20, 2017 resulting in a loss on debt extinguishment of $61,500. In conjunction with the settlement agreement, the Company issued 1,000,000 shares of common stock at a fair market value of $2,700 to Group for fees related to the Settlement Agreement.
Deposit for pending acquisition
Proposed Acquisition of Pirate Oilfield Services, Inc.
On September 13, 2017, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Pirate Oilfield Services, Inc., to purchase outstanding capital stock of Pirate (the “Acquisition”) and assume an outstanding bank note to AIM Bank of Odessa, TX of approximately $850,000 and certain other liabilities outstanding. Mammoth Capital, on behalf of the company, paid $100,000 upon the executive of the agreement to be applied against the principal of the bank note. In addition, Mammoth Capital paid $20,000 Red Diamond Resources and $5,000 to Advances Energy Capital, LLC. on behalf of the Company which is capitalized in the Deposit for Pending Acquisition as of December 31, 2017. The purchase and sale was to be held on or before October 31, 2017. Furthermore, upon closing the Company has agreed to pay $107,000 to South West Bank of Odessa, TX and agree to certain assets and liabilities. The transaction was not settled as of December 31, 2017 and the company did not own title to the assets of Pirate Oilfield Services, Inc. and the company did not assume the agreement upon liability to South West Bank of Odessa. Pirate Oilfield Services, Inc. was formed in 2013 and provides oilfield maintenance services in Texas.
In the period after December 31, 2017, the company is considering a change in the agreement to an asset purchase agreement.
The closing of the stock purchase agreement is subject to customary closing conditions, including, without limitation: (1) the completion of business, accounting and legal due diligence investigations; the receipt of all authorizations, consents and approvals of all governmental authorities or agencies, if necessary; (2) the receipt of any required consents of any third parties; the release of any security interests; and (3) delivery of all documents required for the transfer of shares of the Pirate Oilfield Services.
NOTE 10 — SUBSEQUENT EVENTS
On February 12, 2018, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) that had the effect of designating 9,999,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Company’s board of directors.
TCA Convertible Debenture Agreement
As of December 31, 2017, the nine-month term of the agreement has expired and the obligations continues to be outstanding which is a nonpayment of the obligation of the Senior Secured Revolving Credit Facility dated December 18, 2015 (see Note 4).
Crown Bridge Capital convertible notes payable
In January 2018, the Crown Bridge Capital exercised cashless warrants of 55,928,572 shares of Company common stock, pursuant to a convertible note with Crown Bridge dated March 29, 2017.
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Adar Bays convertible notes payable
In January and February 2018, the Adar Bays, LLC. converted $16,650 of principal balance of convertible notes payable into 190,323,679 shares of common stock.
Mammoth Capital convertible notes payable
In January and February 2018, the Mammoth Capital converted $20,350 of principal balance of convertible notes payable into 121,500,000 shares of common stock.
GS Capital convertible notes payable
In January and February 2018, the GS Capital converted $15,175 of principal balance of convertible notes payable into 71,165,860 shares of common stock.
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FORWARD LOOKING STATEMENTS
Statements made in this Form 10-Q that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Business in general
Elite Group Inc. (the “Company”) was formed in the State of Nevada on May 21, 2013. On January 26, 2016, as a result of a private transaction, whereby 2,000,000 shares of common stock, has been cancelled by the former CEO and 2,020,000 shares of common stock have been issued to Terrence Tecco, a change of control of the Company occurred.
On February 6, 2017, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) that had the effect of changing the name of the corporation to Elite Group, Inc. and designating 999,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Company’s board of directors.
On September 5, 2017, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) that had the effect of designating 2,499,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Company’s board of directors.
On February 12, 2018, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) that had the effect of designating 9,999,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Company’s board of directors.
General strategy
The Company plans to acquire water properties for the oilfield service sector. Management specializes in the acquisition of assets relating to the management of oilfield water used in upstream oil and gas operations. Management's objective is to acquire and consolidate water processing assets in prolific oil and gas exploration areas. Management believes it will accomplish its goal to maximize shareholder value through strategic acquisitions, effective business model design and economies of scale to a fragmented industry. The Company will control the entire process from wellhead to the final destination and use the most environmental friendly practices in all aspects of our operations to protect and conserve the environment for future generations.
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Recent Developments
Proposed Acquisition of Pirate Oilfield Services, Inc.
On September 13, 2017, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Pirate Oilfield Services, Inc., to purchase outstanding capital stock of Pirate (the “Acquisition”) and assume an outstanding bank note to AIM Bank of Odessa, TX of approximately $850,000 and certain other liabilities outstanding. Mammoth Capital, on behalf of the company, paid $100,000 upon the executive of the agreement to be applied against the principal of the bank note. In addition, $20,000 was paid to Red Diamond Resources and $5,000 paid to Advances Energy Capital, LLC. which is capitalized in the Deposit for Pending Acquisition as of December 31, 2017. The purchase and sale was to be held on or before October 31, 2017. Furthermore, upon closing the Company has agreed to pay $107,000 to South West Bank of Odessa, TX and agree to certain assets and liabilities. The transaction was not settled as of December 31, 2017 and the company did not own title to the assets of Pirate Oilfield Services, Inc. and the company did not assume the agreement upon liability to South West Bank of Odessa. Pirate Oilfield Services, Inc. was formed in 2013 and provides oilfield maintenance services in Texas.
CURRENT BUSINESS OPERATIONS
The Company plans to concentrate its development efforts in the Eagle Ford Formation in South Texas. We believe such opportunities exist in the United States with the recent improvements in water disposal. We have only recently begun our planned business operations. To date our operations have primarily been devoted to forming the entity and developing our business plan. We have several properties under contract and have completed most of the financing for these acquisitions.
Results of Operations
Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities next 3 months
Three Month Period Ended December 31, 2017 Compared to Three Month Period Ended December 31, 2016.
Our net loss for the three months ended December 31, 2017 was $2,520,711 compared to a net loss of $123,396, during the three months ended December 31, 2016. Our loss was attributable to financing and administrative costs and professional fees incurred compared to nominal business activity in the prior year.
This change in net loss was primarily the result of the following:
Revenue
We recognized no revenue during the three months ended December 31, 2017 and 2016.
Operating expenses
We incurred operating expenses of $108,034 during the three months ended December 31, 2017 compared to $67,257 of operating expenses during the three months ended December 31, 2016. The primary expense in the three months ended December 31, 2017 was $30,000 of salary expense to our Chief Executive Officer in accordance with an employment agreement dated January 26, 2016. Other operating expenses consisted of general and administrative fees of $49,330 in the three months ended December 31, 2017 compared to $67,257 in the three months ended December 31, 2016 related to office, compliance and professional fees.
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Other Income (Expense)
We incurred interest expense of $696,393 and $143,204, amortization of debt discount of $233,865 and $81,883, financing costs of $22,353 and $28,893 related to our convertible debenture in the three months ended December 31, 2017 and 2016, respectively. Additionally, the change in fair value of the Company’s derivative instruments amounted to a loss of $1,120,578 and a gain of $311,240 in the three months ended December 31, 2017 and 2016, respectively. The Company also issued 176,229,966 shares of common stock on the conversion of convertible debt resulting in an aggregate loss on debt extinguishment of $162,365 and also issued 48,090,9009 Settlement shares to Group 10 to reduce certain outstanding liabilities through December 31, 2017 resulting in a loss on settlement of accounts payable of $65,092. In the prior year period, the Company also issued 4,359,333 Settlement shares to Rockwell to reduce certain outstanding liabilities through December 31, 2016 resulting in a loss on debt extinguishment of $81,883.
Furthermore, the Company into an advisory services agreement with TCA Global Master Fund for investment banking services. The Company shall issue $250,000 in the form of restricted shares of the Company common stock. The issuance of shares are subject to an anti-dilution share issuances to the extent the cash proceeds from the share issuances are inadequate to satisfy the $250,000 fee. The Company issued 139,750 shares of common stock at closing valued at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the agreement date. As of December 31, 2017, an additional issuance of 499,860,280 shares with a fair market value of $249,930 are required to satisfy the advisory agreement whereby an additional financing costs has been recorded to common stock payable. The Company recorded an increase of $699 and $3,563 of stock-based financing costs for the three months ended December 31, 2017 and 2016, respectively.
Net Losses
Our net loss for the fiscal three months ended December 31, 2017 was $2,520,711 compared to a net loss of $123,396 during the three months ended December 31, 2016 due to the factors discussed above.
Weighted average number of shares
The weighted average number of shares outstanding was 370,711,300 and 36,168,150 for the years ended December 31, 2017 and 2016, respectively. The weighted average number of shares is an average calculation incorporating changes to the shares outstanding within the period reported.
Nine Month Period Ended December 31, 2017 Compared to Nine Month Period Ended December 31, 2016.
Our net loss for the nine months ended December 31, 2017 was $4,019,387 compared to a net loss of $1,321,485, during the nine months ended December 31, 2016. Our loss was attributable to operating costs, financing and administrative costs and professional fees incurred compared to nominal business activity in the prior year.
This change in net loss was primarily the result of the following:
Revenue
We recognized no revenue during the nine months ended December 31, 2017 and 2016.
Operating expenses
We incurred operating expenses of $281,680 during the nine months ended December 31, 2017 compared to $224,445 of operating expenses during the nine months ended December 31, 2016. The primary expense in the nine months ended December 31, 2017 and 2016 was $90,000 of salary expense to our Chief Executive Officer in accordance with an employment agreement dated January 26, 2016. Other operating expenses consisted of general and administrative fees of $68,672 and professional and legal expenses of $96,958, compared to general and administrative fees of $25,892 and professional and legal expense of $94,294 in the nine months ended December 31, 2016 related to office, compliance and professional fees.
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Other Income (Expense)
We incurred interest expense of $1,633,264 and $371,676, amortization of debt discount of $469,059 and $114,191, financing costs of $76,084 and $122,447 related to our convertible debenture in the nine months ended December 31, 2017 and 2016, respectively. Additionally, the change in fair value of the Company’s derivative instruments amounted to a loss of $983,596 and a loss of $203,971 in the nine months ended December 31, 2017 and 2016, respectively. The Company also issued 315,973,534 shares of common stock on the conversion of Mammoth Capital convertible debt and settlement shares to Rockwell and Group 10 to reduce certain outstanding liabilities through December 31, 2017 resulted in an aggregate loss on settlement of accounts payable and debt of $499,685. In the prior year period, the Company also issued 4,359,333 Settlement shares to Rockwell to reduce certain outstanding liabilities through December 31, 2016 resulting in a loss on debt extinguishment of $150,696.
Furthermore, the Company into an advisory services agreement with TCA Global Master Fund for investment banking services. The Company shall issue $250,000 in the form of restricted shares of the Company common stock. The issuance of shares are subject to an anti-dilution share issuances to the extent the cash proceeds from the share issuances are inadequate to satisfy the $250,000 fee. The Company issued 139,750 shares of common stock at closing valued at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the agreement date. As of December 31, 2017, an additional issuance of 499,860,280 shares with a fair market value of $249,930 are required to satisfy the advisory agreement whereby an additional financing costs has been recorded to common stock payable. The Company recorded $1,063 and $134,058 of stock-based financing costs for the nine months ended December 31, 2017 and 2016, respectively. Additionally, the Company recorded financing penalties of $74,956.
Net Losses
Our net loss for the fiscal nine months ended December 31, 2017 was $4,019,387 compared to a net loss of $1,321,484 during the nine months ended December 31, 2016 due to the factors discussed above.
Weighted average number of shares
The weighted average number of shares outstanding was 194,919,277 and 15,346,244 for the years ended December 31, 2017 and 2016, respectively. The weighted average number of shares is an average calculation incorporating changes to the shares outstanding within the period reported.
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LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2017, and March 31, 2017, we had $3,381 and $27,222 of cash and cash equivalents.
We have experienced losses of $4,019,387 and $1,321,485 for the nine months ended December 31, 2017 and 2016, respectively, and have an accumulated deficit of $22,737,505 at December 31, 2017. In addition, we have not completed our efforts to establish a stable recurring source of revenues sufficient to cover our operating costs and expect to continue to generate losses for the foreseeable future. There is no assurances that we will be able to obtain an adequate level of financing needed for our near term requirements or the long-term development and exploration of our leases. These conditions raise substantial doubt about our ability to continue as a “going concern”.
The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from directors and, or, the private placement of convertible debt and/or issuance of common stock.
Because of the Company's history of losses, its independent auditors, in the reports on the financial statements for the nine months ended December 31, 2017 and 2016, expressed substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this uncertainty.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management's efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
Cash Flows from Operating Activities
We have generated negative cash flows from operating activities. For the nine months ended December 31, 2017, net cash flows used in operating activities was $320,838 consisting primarily of a net loss of $4,019,387, offset by depreciation expense of $2,480, stock based compensation of $1,063, financing penalties of $74,956, stock issued for services of $23,200, amortization of Original Discount Issuance of $38,241, amortization of debt discount of $469,059, and a change in derivative liability of $983,596 and day one loss on derivative of $1,467,605 and non-cash loss on extinguishment of debt and accounts payable settlement of $499,685, liquidated damages- penalty of $76,019, an increase of $30,109 in accounts payables and accrued liabilities, an increase of $8,900 of accrued officer salary and an increase of $103,247 in accrued interest payable.
For the nine months ended December 31, 2016, net cash flows used in operating activities was $118,027 consisting primarily of a net loss of $1,321,484, offset by the amortization of financing costs of $63,723, stock issued for services of $51,000, non-cash stock compensation of $134,058, amortization of original issue discount of $15,921, amortization of debt discount of $114,191, day one loss on derivative of $289,118, a non-cash loss on extinguishment of debt of $150,696 and a change in derivative liability of $203,971, an increase of $71,386 in accounts payables and accrued liabilities, an increase of $70,010 of accrued officer salary and an increase of $64,923 in accrued interest payable.
Cash Flows from Investing Activities
Cash used in investing activities was $50,573 for the nine months end December 31, 2017, consisting of a payment $20,000 in acquisition related costs for the pending purchase of Pirate Oilfield Services, Inc and purchase of $30,573 in furniture and equipment. There was no investing activity in the nine months ended December 31, 2016.
Cash Flows from Financing Activities
We have financed our operations primarily from the issuance of convertible debt in the nine months ended December 31, 2017. We generated cash from financing activities of $347,570 in the issuance of convertible debentures of $342,163 and $5,407 of shareholder loans in the nine months ended December 31, 2017. We generated cash from financing activities of $118,010 consisting of a cash overdraft of $147, $118,540 in the issuance of convertible debentures, offset by $6,500 of financing costs, and $15,823 from shareholder loans in the nine months ended December 31, 2016.
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PLAN OF OPERATION
We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business
Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next nine months. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to the acquisition of assets. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
MATERIAL COMMITMENTS
As of the date of this Quarterly Report, we have entered into the following material commitments:
Settlement Agreement with Rockwell Capital Partners
On April 26, 2017, the Company entered into a Settlement Agreement and Stipulation (the “Settlement Agreement”) with Rockwell Capital Partners, Inc. (“Rockwell”), pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $46,000 (the “Settlement Amount”) of past-due obligations and accounts payable of the Company. Rockwell purchased the obligations and accounts payable from certain vendors of the Company.
On April 26, 2017, the Circuit Court of the Twelfth Judicial Circuit for Manatee County, Florida (the “Manatee Court”), entered an order (the “Rockwell Order”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), in accordance with a stipulation of settlement, pursuant to the Settlement Agreement between the Company and Rockwell. The Company issued 26,436,500 Settlement shares to Rockwell to reduce certain outstanding liabilities through May 11, 2017 resulting in a loss on debt extinguishment of $79,708. In conjunction with the settlement agreement, the Company issued 4,000,000 shares of common stock at a fair market value of $23,200 to Rockwell for fees related to the Settlement Agreement.
Settlement Agreement with Group 10 Holdings, LLC.
On May 23, 2017, the Company entered into a Settlement Agreement and Stipulation (the “Settlement Agreement”) with Group 10 Holdings, LLC. (“Group 10”), pursuant to which the Company agreed to issue common stock to Group 10 in exchange for the settlement of $55,000 (the “Settlement Amount”) of past-due obligations and accounts payable of the Company. Rockwell purchased the obligations and accounts payable from certain vendors of the Company.
On June 19, 2017, the Circuit Court of the Miami-Dade County, Florida, entered an order (the “Group 10”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), in accordance with a stipulation of settlement, pursuant to the Settlement Agreement between the Company and Group 10. As of November 29, 2017, the Company issued 48,090,909 Settlement shares to Group 10 to reduce certain outstanding liabilities.
Convertible Debenture Agreement Chestnut Hill Capital
On October 20, 2017, the Company entered into a convertible note payable with Chestnut Hill Capital, LLC $11,000 note payable bears interest at a 10% per annum interest rate. The note matures on October 20, 2018.
Convertible Debenture Agreement Adar Bay
On April 25, 2017, the Company entered into a note payable with Adar Bays, LLC. The $50,000 note payable bears interest at a 12% per annum interest rate. The note matures on April 25, 2018.
Convertible Debenture Agreement GS Capital Partner, LLC
On May 12, 2017, the Company entered into a convertible note payable with GS Capital Partners, LLC. The $51,700 note payable bears interest at an 8% per annum interest rate. The note matures on May 12, 2018.
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Convertible Debenture Agreement Crown Bridge
On May 19, 2017, the Company entered into additional draw of the Crown Bridge Partners, LLC convertible debenture agreement in the amount of $49,975. The note is due one year upon issuance of each tranche and bears interest at a 12% rate per annum.
On November 17, 2017, the Company entered into a convertible note payable with Crown Bridge Partners, LLC up to $100,000 in principal. On November 17, 2017, the Company entered into a $25,000 tranche including $2,500 of original issuance discount. The note is due one year upon issuance of each tranche and bears interest at a 12% rate per annum.
Convertible Debenture Agreements Mammoth Capital
On August 18, 2017, the Company entered into a convertible note payable with Mammoth Corporation. The $49,500 note payable includes $4,500 of original issuance discount. The note is due one year upon issuance August 18, 2018 and no further interest shall accrue as long as the note is not in default.
On September 12, 2017, the Company entered into a convertible note payable with Mammoth Corporation. The $125,000 note payable includes $25,000 of original issuance discount. The note is due one year upon issuance September 12, 2018 and no further interest shall accrue as long as the note is not in default.
On September 22, 2017, the Company entered into a convertible note payable with Mammoth Corporation. The $18,000 note payable includes $3,500 of original issuance discount. The note is due on demand and no further interest shall accrue as long as the note is not in default.
On October 3, 2017, the Company entered into a $70,000 convertible note payable with Mammoth Corporation. The note payable is a balance of $52,500 of principal and related interest assigned from the CrownBridge Capital March 29, 2017 note payable of $35,000 and includes $17,500 of original issuance discount. The note is due one year upon issuance October 3, 2018 and no further interest shall accrue as long as the note is not in default.
On October 28, 2016, the Company entered into a $68,743 convertible note payable with Mammoth Corporation. The note payable is a balance of $62,493 of principal and accrued interest assigned from the April 29, 2016 LG Capital Funding, LLC note payable and includes $6,250 of original issuance discount. The note is due one year upon issuance October 28, 2017 and no further interest shall accrue as long as the note is not in default.
On November 14, 2017, the Company entered into a convertible note payable with Mammoth Corporation. The $85,000 note payable includes $18,337 of original issuance discount. The note payable includes advances to the Company of $23,000 in November 2017 and additional advances of $62,000 in December 2017. The note is due on demand and no further interest shall accrue as long as the note is not in default.
On November 30, 2017, the Company entered into a $96,358 convertible note payable with Mammoth Corporation. The note payable is a balance of $49,875 of principal and related interest assigned from the CrownBridge Capital March 29, 2017 note payable and includes $16,060 of original issuance discount. The note is due one year upon issuance November 30, 2018 and no further interest shall accrue as long as the note is not in default.
GOING CONCERN
The independent auditors' audit report accompanying our March 31, 2017 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
OFF-BALANCE SHEET ARANGEMENTS
As of the date of this Quarterly Report, we do not have any off-balance sheet.
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SIGNIFCANT ACCOUNTING POLICIES
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximate their fair values based on the short-term maturity of these instruments. The carrying amount of the Company’s promissory note obligations approximate fair value, as the terms of these notes are consistent with terms available in the market for instruments with similar risk.
We account for our derivative financial instruments, consisting solely of certain stock purchase warrants that contain non-standard anti-dilutions provisions and/or cash settlement features, and certain conversion options embedded in our convertible instruments, at fair value using level 3 inputs. We determine the fair value of these derivative liabilities using the Black-Scholes option pricing model when appropriate, and in certain circumstances using binomial lattice models or other accepted valuation practices.
When determining the fair value of our financial assets and liabilities using the Black-Scholes option pricing model, we are required to use various estimates and unobservable inputs, including, among other things, contractual terms of the instruments, expected volatility of our stock price, expected dividends, and the risk-free interest rate. Changes in any of the assumptions related to the unobservable inputs identified above may change the fair value of the instrument. Increases in expected term, anticipated volatility and expected dividends generally result in increases in fair value, while decreases in the unobservable inputs generally result in decreases in fair value.
Recent Accounting Pronouncements
We reviewed all recent accounting pronouncements issued by the FASB (including the Emerging Issues Task Force), the AICPA, and the SEC and we did not or are not believed by management to have a material impact on our present or future financial statements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
No report required.
ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2017. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the nine-month period ended December 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OFPROCEEDS
No report required.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 5. OTHER INFORMATION
No report required.
ITEM 6. EXHIBITS
Exhibits:
31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1 Certifications pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, on February 20, 2018.
ELITE GROUP INC.
By: /s/ Terrence Tecco
Terrance Tecco
Title: Director (Principal Executive, Financial and Accounting Officer)
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