UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

Commission File Number: 0-55081

 

KinerjaPay Corp.[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2019

or

For the Transition Period from _________ to _________

Commission file number:000-55081

KINERJAPAY CORP.

(Exact name of small business issuerregistrant as specified in its charter)

 

Delaware42-1771817

(State or other Jurisdiction of Incorporation)

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

JI Multatuli, No. 8A Clyde Road

Medan, Indonesia

 
Jl. Multatuli, No.8A, Medan, Indonesia20151
(Address of Principal Executive Offices)(ZIPZip Code)

 

+62-819-6016-168

(Registrant’s Telephone Number, Including Area Code: +62-819-6016-168telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant is a shell company (as defined inhas submitted electronically every Interactive Data File required to be submitted pursuant to Rule 12b-2405 of Regulation S-T (§232.405 of this chapter) during the Exchange Act)preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

 

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

 

Large accelerated filer[  ]Accelerated filer[  ]Non-Accelerated filer [  ]Smaller reporting company [X]

On December 7, 2017 the Registrant had 11,661,036 shares of common stock outstanding.

   

TABLE OF CONTENTS

Item DescriptionPage
Non-accelerated filer[X](Do not check if a smaller reporting company)Smaller reporting company[X]
    
  Emerging growth company[  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act: [  ]

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading symbol(s)

Name of exchange on which registered

NoneN/AN/A

As of June 3, 2019, there were 39,911,502 shares of the registrant’s common stock outstanding.

KINERJAPAY CORP.

FORM 10-Q

FOR THE THREE MONTHES ENDED MARCH 31, 2019

TABLE OF CONTENTS

Page
PART I - FINANCIAL INFORMATION
ITEM 1Financial Statements (unaudited)3
Consolidated Balance Sheets as of March 31, 2019 and December 31, 20183
  
 Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2019 and 20184
Consolidated Statements of Stockholders’ Deficit for the Three Months Ended March 31, 2019 and the year ended December 31, 20185
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 20186
Notes to Consolidated Financial Statements7
ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations33
ITEM 3.Quantitative and Qualitative Disclosures about Market Risk43
ITEM 4.Controls and Procedures43
PART II - OTHER INFORMATION44
   
ITEM 1.Legal ProceedingsFINANCIAL STATEMENTS.344
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND PLAN OF OPERATIONS.4
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.8
ITEM 4.CONTROLS AND PROCEDURES.8
PART II - OTHER INFORMATION
   
ITEM 1.1A.Risk Factors44
 LEGAL PROCEEDINGS.8
ITEM 1A.RISK FACTORS.8
ITEM 2.Unregistered Sales of Equity Securities and Use of ProceedsUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.45
 8
ITEM 3.Defaults Upon Senior SecuritiesDEFAULT UPON SENIOR SECURITIES.45
 9
ITEM 4.Mine Safety DisclosuresMINE SAFETY DISCLOSURE.45
 9
ITEM 5.Other InformationOTHER INFORMATION.45
 9
ITEM 6.ExhibitsEXHIBITS.46
 9
SIGNATURES47

 

 2 

 

 

PART I -– FINANCIAL INFORMATION

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTSBack to Table of Contents

 

Consolidated Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016F-1
Consolidated Statements of Operations for the Three and Nine-Month Periods Ended September 30, 2017 and 2016 (Unaudited).F-2
Consolidated Statements of Comprehensive Loss for the Three and Nine-Month Periods Ended September 30, 2017 and 2016 (Unaudited)F-3
Consolidated Statements of Cash Flows for the Nine-Month Periods September 30, 2017 and 2016 (Unaudited)F-4
Notes to Unaudited Interim Consolidated Financial StatementsF-5

KINERJAPAY CORP. AND SUBSIDIARIES

CONDENSEDCONSOLIDATED BALANCE SHEETS

  March 31, 2019  December 31, 2018 
  (unaudited)     
ASSETS        
Current assets        
Cash $185,714  $150,091 
Accounts receivable, net  30,704   5,778 
Accounts receivable - related party  -   6,295 
Other receivable  14,673   14,036 
Notes receivable  -   120,000 
Prepaid expenses  1,633,959   79,012 
Inventory  20,540   15,712 
Deposits  94,416   10,861 
         
Total current assets  1,980,005   401,785 
         
Other assets, net of amortization  1,637,892   52,415 
Fixed assets, net of accumulated depreciation of $316,399 and $327,192, respectively  695,648   649,698 
         
Total assets $4,313,546  $1,103,898 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
Current liabilities        
Accounts payable $87,913  $52,555 
Tax payable  3,526   12,198 
Accrued expenses and interest  152,631   87,270 
Payable to Related party  941,581   758,221 
Promissory note, related party  600,000   600,000 
Convertible debentures, net of discount of $932,814 and $435,000 as of March 31, 2019 and December 31, 2018, respectively  1,041,055   1,304,853 
Derivative liability  1,442,000   807,000 
Warrant liability  1,679,000   374,000 
         
Total current liabilities  5,947,704   3,996,097 
         
Promissory note, related party, less current portion  355,616   600,000 
         
Total liabilities  6,303,320   4,596,097 
         
Commitments and contingencies (Note 8)        
         
Stockholders’ deficit        
Preferred stock, par value $0.0001 per share; 10,000,000 shares authorized:        
Series A Preferred Stock, 400,000 authorized, 140,000 and 200,000 issued and outstanding, respectively  14   20 
Series B Preferred Stock, 500,000 authorized, 500,000 issued and outstanding  50   50 
Series C Preferred Stock, 2,000,000 authorized, none issued and outstanding  -   - 
Series D Preferred Stock, 200,000 authorized, 200,000 and none issued and outstanding, respectively  20   - 
Series E Preferred Stock, 200,000 authorized, 200,000 and none issued and outstanding, respectively  20   - 
Common stock, par value $0.0001 per share; 500,000,000 shares authorized; 34,335,262 issued and outstanding at March 31, 2019 and 22,089,033 issued and outstanding at December 31, 2018  3,432   2,208 
Additional paid-in capital  24,160,798   14,696,799 
Accumulated deficit  (26,213,110)  (18,145,079)
Stock payable  59,000   34,000 
Accumulated other comprehensive income  -   (80,197)
Total stockholders’ deficit  (1,989,776)  (3,492,199)
         
Total liabilities and stockholders’ deficit $4,313,544  $1,103,898 

The accompanying notes are an integral part of these consolidated financial statements.

 

 3 

 

 

KINERJAPAY CORP. AND SUBSIDIARIES

Consolidated Balance SheetsCONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

As of September 30, 2017 (Unaudited) and December 31, 2016

Back to Table of Contents

 

  September 30, 2017 December 31, 2016
  (Unaudited)  
ASSETS        
Current assets:        
Cash $60,488  $32,591 
Restricted cash  29,841   16,181 
Accounts receivable  22,632   - 
Prepaid expenses  11,448   28,966 
Total current assets  124,409   77,738 
         
Equipment, net of accumulated depreciation of $2,217 and $289, respectively.  13,636   3,845 
Intangible assets  25,000   - 
Total assets $163,045  $81,583 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
         
Current liabilities:        
Accounts payable - trade $2,782  $3,461 
Accounts payable - related party  51,849   - 
Tax payable  907   95 
Accrued interest  1,830   - 
Accrued expenses  3   4,107 
Unissued stock subscriptions  -   150,000 
Total current liabilities  57,371   157,663 
         
Total liabilities  57,371   157,663 
         
Stockholders’ equity (deficit):        
Preferred stock, par value $0.0001 per share; 10,000,000 shares authorized; none issued  -   - 
Common stock, par value $0.0001 per share; 500,000,000 shares authorized; 11,661,036 shares issued and outstanding at September 30, 2017 and 8,627,013 shares issued and outstanding at December 31, 2016  1,165   862 
Additional paid-in capital  8,039,502   3,508,529 
Stock payable  178,000   - 
Accumulated deficit  (8,113,752)  (3,585,626)
Accumulated other comprehensive loss  759   155 
Total stockholders’ equity (deficit)  105,674   (76,080)
Total liabilities and stockholders’ equity $163,045  $81,583 

  For the 3 Months Ended 
  March 31, 2019  March 31, 2018 
       
Revenue $94,939  $- 
Net revenue - related party      (11,277)
Cost of sales  101,219   - 
Gross profit  (6,280)  (11,277)
         
Operating expenses:        
Marketing Expense  63,503   - 
General and administrative  4,750,467   3,305,574 
Depreciation  9,011   1,071 
         
Total operating expenses  4,822,982   3,306,645 
         
Operating loss before other income (expense)  (4,829,262)  (3,317,922)
         
Other income (expense):        
Interest expense  (61,918)  (9,657)
Amortization of debt discount  (997,186)  - 
Financing costs  (473,000)  - 
Change in fair value of derivative liability  459,000   - 
Change in fair value of warrant liability  (1,029,000)  - 
Penalties and loss on conversion of debt  (1,121,501)  - 
Other expenses  (15,165)  (39,656)
         
Total other income (expense)  (3,238,770)  (49,313)
         
Loss before income taxes  (8,068,031)  (3,367,235)
         
Provision for income taxes  -   - 
         
Net loss $(8,068,031) $(3,367,235)
         
Other comprehensive loss adjustments, net of tax:        
Foreign currency translation adjustments  -   - 
Total other comprehensive income, net of tax  -   - 
         
Total comprehensive loss, net of tax  (8,068,031)  (3,367,235)
         
Loss per share - Basic and diluted $(0.26) $(0.23)
         
Weighted average shares outstanding - Basic and diluted  31,594,871   14,423,855 

 

SeeThe accompanying notes to unaudited interimare an integral part of these consolidated financial statements.

 

 F-14 

 

 

KINERJAPAY CORP. AND SUBSIDIARIES

Consolidated Statements of OperationsCONDENSEDCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

For the Three and Nine Months Ended September 30, 2017 and 2016(Unaudited)

(Unaudited)

Back to Table of Contents

 

  For the For the For the For the
  Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
  September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
         
Revenue from services - related entity $1,763,608  $-  $1,914,358  $- 
Costs related to service revenue  1,842,985   -   2,002,073   - 
Gross margin  (79,377)  -   (87,715)  - 
                 
Expenses:                
General and administrative  444,732   363,434   3,993,974   2,444,238 
Depreciation expense  940   17   1,896   103 
Total general and administrative expenses  445,672   363,451   3,995,870   2,444,341 
                 
(Loss) from operations  (525,049)  (363,451)  (4,083,585)  (2,444,341)
                 
Other income (expense):                
Interest expense  (1,830)  (137)  (1,844)  (31)
Loss on debt conversion  -   -   (442,697)  - 
Loss on extinguishment of debt  -   -   -   (9,003)
Total other costs and expenses  (1,830)  (137)  (444,541)  (9,034)
                 
Net loss before income taxes  (526,879)  (363,588)  (4,528,126)  (2,453,375)
Income taxes  -   -   -   - 
Net loss $(526,879) $(363,588) $(4,528,126) $(2,453,375)
                 
Basic and diluted per share amounts:                
Basic and diluted net loss $(0.04) $(0.04) $(0.39) $(0.33)
                 
Weighted average shares outstanding (basic and diluted)  12,718,139   8,195,491   11,530,039   7,405,638 

  Common Stock  Preferred Stock  Additional Paid-in  Stock  Accumulated  Accumulated Other Comprehensive  Total Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Payable  Deficit  Loss  Deficit 
Balance January 1, 2018  12,461,013   1,245   -   -   9,457,265   178,000   (9,751,419)  -   (114,909)
                                     
Issuance of Series A Preferred Stock for cash          400,000   40   499,960               500,000 
Issuance of Series B Preferred Stock for services          500,000   50   870,950               871,000 
Issuance of shares for cash  20,000   2           49,998   (50,000)          - 
Issuance of shares for services  4,365,278   437           3,675,447   (94,000)          3,581,884 
Issuance of shares upon conversion  4,162,948   416           890,761               891,177 
Acquisition of PT Kinerja Indonesia                  (1,132,110)              (1,132,110)
Penalties and loss on conversion of debt                  176,745               176,745 
Loss on modification of warrant exercise price                  71,117               71,117 
Issuance of shares upon conversion of preferred stock  416,667   42   (200,000)  (20)  (22)              - 
Loss on modification of Series A preferred stock conversion price                  190,255               190,255 
Issuance of shares upon exercise of warrants  463,127   46           99,954               100,000 
Issuance of shares in connection with convertible debt  200,000   20           37,480               37,500 
Warrants issued in connection convertible debt                  262,000               262,000 
Reclass of warrant fair value to liability classification                  (514,000)              (514,000)
Reclass of derivative liability upon conversion of related convertible debentures                  61,000               61,000 
Foreign currency translation adjustments                              -   - 
Net loss                          (8,393,660)      (8,393,660)
                                     
Balance December 31, 2018  22,089,033  $2,208   700,000  $70  $14,696,799  $34,000  $(18,145,079) $(80,197) $(3,492,199)
                                     
Issuance of Series D Preferred Stock for acquisition of FRS          200,000   20   2,372,925               2,372,945 
Issuance of Series E Preferred Stock for services          200,000   20   3,559,397               3,559,417 
Issuance of shares and warrant units for cash                      70,000           70,000 
Issuance of shares for services  3,450,000   345           1,037,855               1,038,200 
Issuance of shares upon conversion  7,562,896   756           719,366               720,122 
Issuance of shares upon conversion of preferred stock  400,000   40   (64,000)  (6)  (34)              - 
Loss on modification of Series A preferred stock conversion price  833,333   83           906,490               906,573 
Warrants issued in connection convertible debt                  231,000               231,000 
Reclass of warrant fair value to liability classification                  (231,000)  (45,000)          (276,000)
Reclass of derivative liability upon conversion of related convertible debentures                  678,000               678,000 
Additional shares issued in conversion for penalties                  190,000               190,000 
Foreign currency translation adjustments                              80,197   80,197 
Net loss                          (8,068,031)      (8,068,031)
                                     
Balance March 31, 2019  34,335,262  $3,432   1,036,000  $104  $24,160,798  $59,000  $(26,213,110) $   $(1,989,776)

 

See

The accompanying notes to unaudited interimare an integral part of these consolidated financial statements.

 

 F-25 

 

 

KINERJAPAY CORP. AND SUBSIDIARIES

Consolidated Statements of Comprehensive LossCONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three and Nine Months Ended September 30, 2017 and 2016

(Unaudited)

Back to Table of Contents

 

  Three months  Three months  Nine months  Nine months 
  ended  ended  ended  ended 
  September 30, 2017  September 30, 2016  September 30, 2017  September 30, 2016 
Net loss $(526,879) $(363,588) $(4,528,126) $(2,453,375)
Foreign currency translation adjustments  (115)  8,430   (139)  8,656 
Total comprehensive loss, net of tax $(526,994) $(355,158) $(4,528,265) $(2,444,719)

  For the Three Months Ended 
  March 31, 2019  March 31, 2018 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income loss $(8,068,031) $(3,367,235)
Adjustments to reconcile net income/(loss) to net cash used in operating activities:        
Depreciation and amortization  9,011   1,071 
Amortization of debt discount  997,186   81,749 
Stock-based compensation  -   2,575,416 
Issuance of shares for services  1,038,200   - 
Change in fair value of derivative liability  (459,000)  - 
Change in fair value of warrant liability  1,029,000     
Penalties and loss on conversion of preferred stock  1,030,711   - 
Loss on modificaiton of warrant exercise price  -   - 
Financing costs  473,000   - 
Series E Preferred stock issued for services  3,559,417   - 
         
Changes in net assets and liabilities:        
(Increase) decrease in accounts receivable  (18,631)  (9,399)
(Increase) decrease in other receivable  (637)  - 
(Increase) decrease in inventory  (4,828)  (16,105)
(Increase) decrease in prepaid expenses  (563,291)  6,124 
(Increase) decrease in other assets  (167,743)  95,375 
Increase (decrease) in accounts payable  26,686   9,630 
Increase (decrease) in accrued liabilities  65,361   (40,273)
         
CASH USED IN OPERATING ACTIVITIES  (1,053,589)  (663,647)
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Purchase of equipment  (54,961)  (2,520)
         
CASH USED IN INVESTING ACTIVITIES  (54,961)  (2,520)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
         
Payments on promissory note  (244,384)  - 
Related party debt  183,360   - 
Proceeds from issuance of common stock  70,000   - 
Proceeds on debt  -   216,000 
Proceeds from convertible debentures  1,055,000   - 
Issuance of Series A PS for cash  -   500,000 
Shares issued upon exercise of warrants  -   100,000 
         
CASH PROVIDED BY FINANCING ACTIVITIES  1,063,976   816,000 
         
FOREIGN CURRENCY TRANSLATION ADJUSTMENT  80,197   - 
         
NET CHANGE IN CASH  35,623   149,833 
         
CASH AT BEGINNING OF YEAR  150,091   160,629 
         
CASH AT END OF YEAR $265,911  $310,462 
         
Supplemental disclosure of cash flow information:        
Interest expense paid $-  $- 
         
Non-cash Investment and Financing Activities:        
Debt discount attributable to beneficial conversion feature $-  $- 
Common Stock issued for debt settlement $-  $- 
Debt issued for equity commitment $-  $- 
Common shares issued upon conversion of debt $720,122  $- 
Common shares issued upon conversion of preferred stock  40     
Issuance of preferred shares for acquisition $2,372,945  $- 

 

SeeThe accompanying notes to unaudited interimare an integral part of these consolidated financial statements.

 

 F-3

KINERJAPAY CORP.

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2017 and 2016

(Unaudited)

Back to Table of Contents

  For the  For the 
  Nine Months Ended  Nine Months Ended 
  September 30, 2017  September 30, 2016 
Cash flows from operating activities:        
Net loss $(4,528,126) $(2,453,375)
Adjustments required to reconcile net loss to cash used in operating activities:        
Shares issued for services  2,097,751   1,508,133 
Loss on conversion of debt  442,697   - 
Depreciation expense  1,896   103 
Loss on extinguishment of debt  -   9,003 
Share-based compensation  1,116,829   - 
Changes in net assets and liabilities:        
(Increase) decrease in accounts receivable  (22,632)  - 
(Increase) decrease in other assets  (25,000)  - 
(Increase) decrease in prepaid expenses  17,518   (4,616)
Increase (decrease) in accounts payable  (148,019)  31,230 
Increase (decrease) in accrued liabilities  (2,274)  7,094 
Net cash used in operating activities  (1,049,360)  (902,428)
         
Cash flows from investing activities:        
Purchase of equipment  (11,687)  (2,720)
Cash used in investing activities  (11,687)  (2,720)
         
Cash flows from financing activities:        
Proceeds from issuance of common stock  952,000   804,987 
Payments on debt  -   (8,689)
Borrowings on debt - related party  50,000   - 
Borrowings on debt  100,000   - 
Net cash provided by financing activities  1,102,000   796,298 
         
Foreign currency adjustment  604   8,656 
         
Change in cash  41,557   (100,194)
Cash - Beginning of period  48,772   250,194 
Cash - End of period $90,329  $150,000 
         
Supplemental Cash Flow Disclosure:        
Non-cash transactions:        
Settlement of restricted cash with common stock $-  $250,013 
Stock issued to settle debt $100,000  $15,750 

See notes to unaudited interim consolidated financial statements.

F-46 

 

 

KINERJAPAY CORP. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(formerly Solarflex Corp.)
Notes to Unaudited Consolidated Financial Statements
Back to Table of ContentsFOR THE THREE MONTHS ENDED MARCH 31, 2019

 

1. The Company and Significant Accounting Policies

Organizational BackgroundNote 1 – description of business

 

KinerjaPay Corp. (“Kinerja” or the(the “Company”) is a Delaware corporation, and commenced operations during the period ended September 30, 2017. The Company was incorporated under the laws of the State of Delaware on February 12, 2010. The business plan of the Company was to develop a commercial application of the design in a patent of a “Solar element and method of manufacturing the same”. On November 10, 2015 this plan was abandoned and all related contracts and agreements rescinded.

2010 as Solarflex Corp. On December 1, 2015, the Company entered into a license agreement with PTP.T. Kinerja Indonesia (“P.T. Kinerja” the “Licensor”), an entity organized under the laws of Indonesia and controlled by Mr. Edwin Ng, (“PT Kinerja”),our chairman, CEO and control stockholder, for an exclusive, world-wideworld- wide license to use and commercially exploit certain technology and intellectual property and its website, KinerjaPay.com. Pursuant to the License Agreement, the Company, as Licensee, was granted the exclusive, world-wide rights to the KinerjaPay IP, an e-commerce platform that provides users with the convenience of e-wallet service for bill transfer and online shopping and is among the first portals to allow users the convenience to top-up phone credit. In conjunction with thethis agreement, the companyCompany changed its name from Solarflex Corp. to KinerjaPay Corp. On April 6, 2016, P.T. KinerjaPayKinerja Pay Indonesia, a wholly-owned subsidiary of the Company, was organized under the laws of Indonesia. PT KinerjaPay Indonesia is

On August 31, 2018, the Company completed its acquisition of its Licensor PT. Kinerja which became a wholly-owned subsidiary of the Company (Note 3). The result of this acquisition enabled the Company to present its revenue on a gross basis as the principal going forward. Upon the closing of the acquisition of the Licensor by the Licensee, the License Agreement effectively ceased. In addition, the acquisition gave the Company the ability to consolidate its IP technology and both PT Kinerja Indonesia and PT KinerjaPay Indonesia are owned and controlled by Mr. Ng,manage its 1,500 square-feet data center located in North Sumatra which the Company plans to expand to provide cloud computing services as well as data mining from the Company’s CEOexisting customer base. The Company believes that the acquisition will make the Company more cost efficient and control shareholder, and are deemed to be related entities.potentially generate more revenues from other IT services.

 

The accompanying financial statements ofOn September 13, 2018, the Company were preparedincorporated PT. Kinerja Simpan Pinjam, a new wholly-owned subsidiary, for the purpose of managing its KFUND brand as a peer-to-peer (P2P) lending platform focusing on micro-lending activities. The Company plans to develop the KFUND brand mainly targeting the consumer sector to facilitate micro loans ranging from $100 to $1,000 on biweekly or monthly term. KFUND is still in preparation stage and expected to start in the accountssecond quarter of the Company under the accrual basis of accounting.2019.

 

Basis of Presentation:Going Concern

 

The accompanying consolidated 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 Company has not established sufficient revenue to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of September 30, 2017,For the cash resources ofthree months ended March 31, 2019, the Company were insufficient to meet its current business plan.had a net loss of approximately $8,068,000. At March 31, 2019, the Company had an accumulated deficit of approximately $26,213,000 and a working capital deficit of approximately $3,967,000. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.concern, within one year from the issuance date of this filing. The Company’s ability to continue as a going concern is dependent on its ability to raise the required additional capital or debt financing to meet short and long-term operating requirements. During the three months ended March 31, 2018, the Company received net cash proceeds of approximately $935,000 from the issuance of new convertible debentures. Subsequent to March 31, 2019, the Company received approximately $500,000 in net cash proceeds from the issuance of new convertible debentures. 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, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict our operations. The Company continues to pursue external financing alternatives to improve its working capital position. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

7

 

Principles of Consolidation:Consolidation

The financial statements include the accounts of KinerjaPay Corp. and its wholly owned subsidiarysubsidiaries PT KinerjaPay, Indonesia.PT Kinerja, and PT Kinerja Simpan Pinjam. All significant inter-company balances and transactions have been eliminated.

 

F-5

Note 2 - Significant Accounting Policies

 

Basis of Presentation

The accompanying unaudited financial information as of and for the three months ended March 31, 2019 and 2018 has been prepared in accordance with GAAP in the U.S. for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such date and the operating results and cash flows for such periods. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission, or the SEC. These unaudited financial statements and related notes should be read in conjunction with our audited financial statements for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 24, 2019.

The condensed consolidated balance sheet at December 31, 2018 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.

Use of Estimates:Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted accounting principlesin the United States requires management to make estimates and assumptionsjudgments that affect the reported amounts of assets, and liabilities, and related disclosure of contingent assets and liabilities at the date of the financial statement date and the reported amounts of revenues and expenses during the reporting period.periods. On an on-going basis, we evaluate our estimates, including those related to allowances for bad debt and inventory obsolescence, income taxes, and contingencies and litigation.Webase our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results couldmay differ from these estimates under different assumptions or conditions.

Foreign Currency

Non-U.S. entity operations are recorded in the estimates.functional currency of eachentity.Results of operations for non-U.S. dollar functional currency entities are translated into U.S. dollars using average currency rates or actual action date currency rate. Assets and liabilities are translated using currency rates at period end. Foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within stockholders’equity.

 

Cash and Cash Equivalents:Equivalents

 

For financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of sixthree months or less to be cash or cash equivalents. There were no cash equivalents as of September 30, 2017March 31, 2019 and December 31, 2016.2018.

 

Property and Equipment:

8

 

New property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

Valuation of Long-Lived Assets:

We review the recoverability of our long-lived assets including equipment, goodwill and other intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.

Stock-Based Compensation:

Stock-based awards are accounted for using the fair value method in accordance with ASC 718,Share-Based Payments. Our primary type of share-based compensation consists of stock options. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company’s common stock, the estimated volatility of the Company’s common stock, the exercise price of the warrants and the risk free interest rate.

Accounting For Obligations And Instruments Potentially To Be Settled In The Company’s Own Stock:

We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with FASB ASC 815,Accounting for Derivative Financial Instruments.This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock.

 

Fair Value of Financial Instruments:Instruments

 

FASBASC 825, “Financial Instruments,” requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value.FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At September 30, 2017 and December 31, 2016,2018 and December31, 2017, the carrying value of certain financial instruments (cash, and cash equivalents, accounts payable and accrued expenses.)expenses, and notes payable) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.

F-6

 

Fair Value Measurements:Measurements

 

The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques 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 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used in measuring fair value are:

 

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

●Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

 

Level 2: Inputs to the valuation methodology include:

●Level 2: Inputs to the valuation methodology include:

 

-Quoted prices for similar assets or liabilities in active markets;

- Quoted prices for similar assets or liabilities in active markets;

- Quoted prices for identical or similar assets or liabilities in inactive markets;

- Inputs other than quoted prices that are observable for the asset or liability;

- Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Quoted prices for identical or similar assets or liabilities in inactive markets;

-

Inputs other than quoted prices that are observable for the asset or liability;

-

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

 

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

●Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

The assets or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following table presentsCompany did not have any Level 1 or Level 2 assets that were measured and recognizeliabilities at March 31, 2019. The Derivative liabilities at December 31, 2018, are Level 3 fair value on September 30, 2017measurements. The Company did not have any Level 1, Level 2 or Level 3 financial assets and liabilities as of and for the year ended December 31, 20162018.

The table below sets forth a summary of the changes in the fair value of the Company’s derivative liabilities classified as Level 3 for the three months ended March 31, 2019:

  2019 
Balance at beginning of the period $807,000 
Initial recognition of conversion feature  1,285,000 
Additions for increases in principal  487,000 
Reclassification to equity  (678,000)
Change in fair value  (459,000)
Balance at end of the period $1,442,000 

At March 31, 2019, the Company estimated the fair value of the conversion feature derivatives embedded in the convertible debentures based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used consists, in part, of the price of the Company’s common stock, a risk free interest rate based on the average yield of a Treasury note and expected volatility of the Company’s common stock all as of the measurement dates, and the years then ended on a recurring basis:various estimated reset exercise prices weighted by probability.

 

Fair Value Measurements at September 30, 2017

 Quoted Prices in Active

Markets for

Identical Assets

Significant Other

Observable Inputs

Significant

Unobservable Inputs

Total(Level 1)(Level 2)(Level 3)
None$-$-$-$-
Total assets at fair value$-$-$-$-9 

 

Fair Value Measurements at DecemberThe table below sets forth a summary of the changes in the fair value of the Company’s warrant liabilities classified as Level 3 for the three months ended March 31, 20162019:

  2019 
Balance at beginning of the period $374,000 
Initial recognition of warrant liability  276,000 
Change in fair value  1,029,000 
Balance at end of the period $1,679,000 

 

Quoted Prices in Active

At March 31, 2019, the Company estimated the fair value of the warrant liabilities based on the Black Scholes pricing model. The key valuation assumptions used consists, in part, of the price of the Company’s common stock, a risk-free interest rate based on the average yield of a Treasury note and expected volatility of the Company’s common stock all as of the measurement dates.

Markets for

Identical Assets

Significant Other

Observable Inputs

Significant

Unobservable Inputs

Total(Level 1)(Level 2)(Level 3)
None$-$-$-$-
Total assets at fair value$-$-$-$-

 

When the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the periods ended September 30, 2017March 31, 2019 and December 31, 2016,2018, there were no significant transfers of financial assets or financial liabilities between the hierarchy levels.

 

F-7

Revenue Recognition:

Our principal products and services are: (i) our electronic payment service (“EPS”) and (ii) our virtual marketplace both of which are available on our portal under the domain name KinerjaMall.com. Through our Portal and Mobile App we provide EPS to consumers and merchants. Our EPS provides an affordable, secure and reliable method to consumers and merchants, as well as friends and family, to pay and transfer money using electronic devices (e.g., mobile, tablets and personal computers). In addition, consumers, merchants and businesses of all sizes can accept payments from merchant websites and mobile devices. Our EPS service enables consumers to conveniently pay utility bills, phone bills, credit card payments and add credit to their cell phone accounts. We developed a proprietary digital e-wallet software, which provides users with the ability to complete EPS transactions safely and conveniently. The e-wallet acts as an escrow account as payments will only be released to the seller once the buyer has received the product. Revenue from sales of products in our marketplace (KinerjaMall.com) and remittance services are net commission earned, whereas we book gross revenue from sales of prepaid phone pulse, data plan, prepaid electricity token and utility bills (water and electricity). Revenue from net commission contributed less than 1% of the total revenue generated.

The Company purchases data, prepaid mobile plans, and more from a list of vendors that specialize in these transactions. We have a risk of loss as we are buying the plans without the right to return them, therefore we are a principal to the transaction and not an agent. Based upon this, gross revenue treatment appears reasonable for these transactions.

Both PT Kinerja and PT KinerjaPay Indonesia, the Company’s subsidiary created under the laws of Indonesia, are owned and controlled by Mr. Ng, and considered related. All revenue is earned by PT Kinerja, and then transferred to us either gross or net depending on the revenue transaction.

We pay transaction fees as follows: (i) 3.9% + $0.30 when senders fund payment transactions using PayPal; (ii) no fees when customers fund payment transactions by electronic transfer of funds from a bank accounts; and (iii) fees of $0.25 to $0.50 per transaction if customers fund payment transactions by using a third party payment gateway. To date, 0%, 80% and 20%, respectively, of our fees are represented by transactions (i), (ii) and (iii), respectively.

Accounts Receivable

Accounts receivable consist primarily of trade receivables. The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable. As of September 30, 2017, the Company had $22,632 in accounts receivable due from customer sales on the Company’s Portal which have not yet been collected. The allowance for doubtful trade receivables was $0 as of September 30, 2017 as we believe all of our receivables are less than 30 days old, and are fully collectable.

Earnings per Common Share:

 

We compute net income (loss) per share in accordance with ASC 260,Earning per Share.Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. For the three months ended March 31, 2019, the Company had approximately $1,742,000 in convertible debentures whose approximately 11,906,000 underlying shares are convertible at the holders’ option at conversion prices ranging from – a fixed conversion price of $1.75 to a variable conversion rate of 60% to 65% of the defined trading price and approximately 4,531,000 warrants with an exercise price of $3.00 to $0.20, which were not included in the calculation of diluted EPS as their effect would be anti-dilutive. For the three months ended March 31, 2018, the Company had approximately $1,977,000 in convertible debentures whose approximately 4,731,000 underlying shares are convertible at the holders’ option at conversion prices ranging from – 60% to 65% of the defined trading price and approximately 3,556,000 warrants with an exercise price of $2.00 to $1.00, which were not included in the calculation of diluted EPS as their effect would be anti-dilutive.

Revenue from Purchased Products

We have eight different revenue products, including, Mobile phone prepaid, Kinerja Store, Payment Gateway Services, Instant Pay Fees Collection, Marketplace Merchant Partners, Marketplace Merchant Users, Remittance, and Unipin. To date substantially all our revenue has been earned in the mobile home prepaid product.

The Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

 

 F-810 

 

 

Common Stock Split:Income Taxes

 

On January 15, 2016 we declared a reverse split of our common stock. The formula provided that every thirty (30) issued and outstanding shares of common stock of the Corporation be automatically split into one (1) share of common stock. The reverse split was effective upon receipt of approval from FINRA. Except as otherwise noted, all share, option and warrant numbers have been restated to give retroactive effect to this split. All per share disclosures retroactively reflect post-split shares.

Income Taxes:

We have adopted ASC 740,Accounting for Income Taxes.Pursuant to ASC 740, we are required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

 

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

 

Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of our net deferred tax assets is dependent upon our generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all of our net deferred tax asset. Management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which we make the determination. Our tax rate may also vary based on our results and the mix of income or loss in domestic and foreign tax jurisdictions in which we operate.

 

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and to the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we will reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We will record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.

 

ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized.

 

Uncertain Tax Positions:Positions

 

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of FASB ASC 740-10,Accounting for Uncertain Income Tax Positions,, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

 F-911 

 

 

Our federal and state income tax returns are open for fiscal years ending on or after December 31, 2013. We are not under examination by any jurisdiction for any tax year. At September 30, 2017 we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under FASB ASC 740-10.Recent Accounting Pronouncements

 

Recent Issued Accounting Standards

Effective January, 2017,In February 2016, the Company adopted Accounting Standards Update (ASU)FASB issued ASU No. 2015-17, Income Taxes2016-02,Leases (Topic 740): Balance Sheet Classification842) The standard requires all leases that have a term of Deferred Taxes, which changes how deferred taxes are classified in organizations’over 12 months to be recognized on the balance sheets. The ASU eliminatessheet with the current requirementliability for organizationslease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, all deferred tax assets and liabilitiesbe paid over the term. Recognition of the costs of these leases on the income statement will be requireddependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be classifiedrecognized as noncurrent. The amendments apply to all organizations that present a classified balance sheet. For public companies,single operating expense on a straight-line basis over the amendments arelease term. Costs for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest on the lease liability). This standard will be effective for financial statements issued forour interim and annual periods beginning after December 15, 2016,January 1, 2019 and interim periods within those annual periods (i.e., in the first quarter of 2017 for calendar year-end companies). Early adoption is permitted for all entities as ofmust be applied on a modified retrospective basis to leases existing at, or entered into after, the beginning of an interim or annual reporting period.the earliest comparative period presented in the financial statements. The guidance may be applied either prospectively,Company adopted ASC 842 on January 1, 2019, with no impact on their financial statements.

In August 2018, FASB released ASU 2018-13, Fair Value Measurement (Topic 820) regarding Disclosure Framework – Changes to the Disclosure Requirements for all deferred tax assetsFair Value Measurement. The amendments modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statements, including the consideration on costs and liabilities, or retrospectively (i.e., by reclassifyingbenefits.

In June 2018,FASBreleased ASU 2018-07, Compensation – Stock Compensation to improve the comparative balance sheet). If applied prospectively, entitiesNonemployee Share-Based Payment Accounting. The amendment is as follow: (1) Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment award within the scope ofTopic718 are required to include a statement that prior periods were not retrospectively adjusted. If applied retrospectively, entities are also required to include quantitative information about the effectsmeasured at grant-date fair value of the change on prior periods.equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. (2) Equity-classified nonemployee share- based payment awards are measured at grant date. The adoptiondefinition of this ASU did not havegrant date is amended to generally state the date at which a significant impact ongrantor and a grantee reach a mutual understanding of the condensed consolidated financial statements.key terms and conditions of a share-based payment awards. (3) Consistent with the accounting for employee share-based payment awards, an entity considers the probability of satisfying performance conditions when nonemployee share-based payment awards contain such conditions.

 

Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.

Effective January, 2017, the Company adopted Accounting Standards Update (ASU) No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees.

Several aspectsManagement’s Evaluation of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments also simplify two areas specific to private companies.

For public business entities, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period periods (i.e., in the first quarter of 2017 for calendar year-end companies).Subsequent Events

 

The adoptionCompany evaluates events that have occurred after the balance sheet date of these ASU’sMarch 31, 2019, through the date which the consolidated financial statements were issued. Based upon the review, other than described in Note 9 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have a significant impact onrequired adjustment or disclosure in the consolidated financial statements.

 

During 2016,Note 3 - Other Assets

Included in other assets is the FASBlong term portion of preferred shares issued several Accounting Standard Updates that focusesin connection with the FRS acquisition and related employment agreement (See Note 7).

Also included in other assets is $157,000 paid as a finder’s fee in connection with an expected equity investment in the Company. The amount will be offset against the investment in equity when the transaction closes.

Other assets also include amounts related to an agreement entered into on certain implementation issuesJuly 31, 2017, with Ace Legends Pte. Ltd. in connection with a partnership in game development, for a period of 18 months. The agreement was amended to commence on December 1, 2017. The agreement called for the Company to pay $100,000 in cash and to issue 80,000 shares of common stock of the new revenue recognition guidance including Narrow-Scope Improvements and Practical Expedients, Principal versus Agent Considerations and Identifying Performance Obligations and Licensing. An entity should applyCompany. The shares were valued at $128,000, based on the amendments in this ASU using onetrading value of the following two methods:

1.            Retrospectively to each prior reporting period presented with a possibility to elect certain practical expedients, or,

2.            Retrospectively withcommon stock of the cumulative effect of initially applying ASU 2014-09 recognized atCompany on the date of initial application. If an entity elects the latter transition method, it also should provide certain additional disclosures.agreement. As of March 31, 2019, and 2018, $0 and $42,094, respectively, of amortization expense has been recognized. The balance net of amortization as of March 31, 2019 and December 31, 2018 is $31,815.

 

 F-1012

Note 4 - Fixed Assets

Fixed assets consist of the following:

  March 31, 2019  December 31, 2018 
Building $783,953  $729,760 
Vehicles  27,296   26,713 
Office Equipment and Furniture  200,797   220,417 
   1,012,047   976,890 
Less: Accumulated Depreciation  (316,399)  (327,192)
  $695,648  $649,698 

Depreciation expense for the three months ended March 31, 2019 and 2018 was $9,011 and $65,086, respectively.

Note 5 – Convertible Notes Payable

On January 2, 2019, the Company executed an 12% convertible promissory note payable to Power Up Lending, LLC in the principal amount of $43,000, which is due on October 30, 2019. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible during first 180 days after issuance at a fixed conversion price of $1.75. After the initial conversion period, the conversion price shall equal the lesser of: (i) the fixed price; and (ii) 61% multiplied by the market price (as defined in the note). Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature does not meet the definition of a derivative during the first 180 days but will meet the definition of a derivative when the conversion price becomes variable and would at that time require bifurcation and to be accounted for as a derivative liability.

On January 18, 2019, the Company entered into a convertible note with Tangiers Global, LLC for the principal amount of $165,000, with an OID of $15,000, convertible into shares of common stock of the Company, which matures on January 18, 2020. The note bears interest at 10%, which increases to 20% upon an event of default. In an event of default as set forth in the note, the outstanding principal balance increases by 40%. The note is convertible at 65% multiplied by the lowest closing price during the 15 days prior to the conversion. The discount increases by 5% discount if there is a DTC “chill” in effect., and an additional 5% if the Company is not DWAC eligible. Per the agreement, the Company is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 120% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time ranging from the date of issuance of the debenture. The conversion feature meets the definition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability.

The Company estimated the fair value of the conversion feature derivative embedded in the debenture at issuance at $228,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.08 at issuance date; a risk-free interest rate of 2.60% and expected volatility of the Company’s common stock, of 148.69%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $63,000 was immediately expensed as financing costs.

On January 25, 2019, the Company entered into a convertible note with Armada Investment Fund LLC for the principal amount of $38,500 for a purchase price of $35,000, convertible into shares of common stock of the Company, which matures on October 25, 2019. The note bears interest at 8%, which increases to 24% upon an event of default. In an event of default as set forth in the note, the default sum becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible at 65% multiplied by the lowest closing price during the 20 days prior to the conversion. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time ranging from the date of issuance of the debenture. The conversion feature meets the definition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability.

13

In connection with the Armada note dated January 25, 2019, the Company issued 115,500 warrants, exercisable at $0.49, with a five year term. The Company estimated the fair value of the warrants using the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.66 at issuance date; a risk-free interest rate of 2.23% and expected volatility of the Company’s common stock, of 158.6%, resulting in a fair value of $72,000.

The Company estimated the fair value of the conversion feature derivative embedded in the debenture at issuance at $39,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.05 at issuance date; a risk-free interest rate of 2.60% and expected volatility of the Company’s common stock, of 177.54%, and the various estimated reset exercise prices weighted by probability. This plus the fair value of the warrants resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $72,500 was immediately expensed as financing costs.

On January 25, 2019, the Company entered into a convertible note with Jefferson Street Capital LLC for the principal amount of $38,500 for a purchase price of $35,000, convertible into shares of common stock of the Company, which matures on October 25, 2019. The note bears interest at 8%, which increases to 24% upon an event of default. In an event of default as set forth in the note, the default sum becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible at 65% multiplied by the lowest closing price during the 20 days prior to the conversion. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time ranging from the date of issuance of the debenture. The conversion feature meets the definition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability on the date the note becomes convertible.

In connection with the Jefferson note dated January 25, 2019, the Company issued 115,500 warrants, exercisable at $0.49, with a five year term. The Company estimated the fair value of the warrants using the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.66 at issuance date; a risk-free interest rate of 2.23% and expected volatility of the Company’s common stock, of 158.6%, resulting in a fair value of $72,000.

The Company estimated the fair value of the conversion feature derivative embedded in the debenture at issuance at $39,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.05 at issuance date; a risk-free interest rate of 2.60% and expected volatility of the Company’s common stock, of 177.54%, and the various estimated reset exercise prices weighted by probability. This plus the fair value of the warrants resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $72,500 was immediately expensed as financing costs.

On January 25, 2019, the Company entered into a convertible note with BHP Capital NY, Inc. for the principal amount of $38,500 for a purchase price of $35,000, convertible into shares of common stock of the Company, which matures on October 25, 2019. The note bears interest at 8%, which increases to 24% upon an event of default. In an event of default as set forth in the note, the default sum becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible at 65% multiplied by the lowest closing price during the 20 days prior to the conversion. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time ranging from the date of issuance of the debenture. The conversion feature meets the definition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability.

14

In connection with the BHP note dated January 25, 2019, the Company issued 115,500 warrants, exercisable at $0.49, with a five year term. The Company estimated the fair value of the warrants using the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.66 at issuance date; a risk-free interest rate of 2.23% and expected volatility of the Company’s common stock, of 158.6%, resulting in a fair value of $72,000.

The Company estimated the fair value of the conversion feature derivative embedded in the debenture at issuance at $39,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.05 at issuance date; a risk-free interest rate of 2.60% and expected volatility of the Company’s common stock, of 177.54%, and the various estimated reset exercise prices weighted by probability. This plus the fair value of the warrants resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $72,500 was immediately expensed as financing costs.

On January 28, 2019, the Company executed an 12% convertible promissory note payable to Power Up Lending, LLC in the principal amount of $48,000, which is due on November 30, 2019. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible during first 180 days after issuance at a fixed conversion price of $1.75. After the initial conversion period, the conversion price shall equal the lesser of: (i) the fixed price; and (ii) 61% multiplied by the market price (as defined in the note). Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature does not meet the definition of a derivative during the first 180 days but will meet the definition of a derivative when the conversion price becomes variable and would at that time require bifurcation and to be accounted for as a derivative liability.

On February 28, 2019, the Company executed an 10% fixed convertible promissory note payable to Crossover Capital Fund I, LLC in the principal amount of $115,000 with a $10,000 OID, which is due on November 28, 2019. In the case of a sale event, as defined in the agreement, the principal amount of the note increases to 150%. The note is convertible into shares of Common Stock at a conversion price of the lower of (i) $1.00 per share or (ii) 65% of the lowest trading price for the 20 prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. The discount increases 10% if there is a DTC “chill” in effect. The conversion price shall be adjusted upon subsequent sales of securities at a price lower than the original conversion price. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 125% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. Per the agreement, the Company is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the note. The conversion feature met the definition of a derivative and required bifurcation and to be accounted for as a derivative liability.

The Company estimated the fair value of the conversion feature derivative embedded in the debenture at issuance at $119,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.07 at issuance date; a risk-free interest rate of 2.54% and expected volatility of the Company’s common stock, of 181.78%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $4,000 was immediately expensed as financing costs.

15

On March 4, 2019, the Company executed an 8% fixed convertible promissory note payable to Morningview Financial, LLC in the principal amount of $55,000 with a $5,000 OID, for a purchase price of $50,000, which is due on March 5, 2020. In the case of a sale event, as defined in the agreement, the principal amount of the note increases to 150%. The note is convertible into shares of Common Stock at a conversion price of 65% of the market price, as defined in the note. The discount increases 15% if there is an event of default, and 10% if the shares are not deliverable via DWAC. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. Per the agreement, the Company is required at all times to have authorized and reserved eight times the number of shares that is actually issuable upon full conversion of the note. The conversion feature met the definition of a derivative and required bifurcation and to be accounted for as a derivative liability.

The Company estimated the fair value of the conversion feature derivative embedded in the debenture at issuance at $61,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.09 at issuance date; a risk-free interest rate of 2.54% and expected volatility of the Company’s common stock, of 181.78%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $6,000 was immediately expensed as financing costs.

On March 5, 2019, the Company executed an 12% convertible promissory note payable to Power Up Lending, LLC in the principal amount of $53,000, which is due on January 15, 2020. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible during first 180 days after issuance at a fixed conversion price of $1.75. After the initial conversion period, the conversion price shall equal the lesser of: (i) the fixed price; and (ii) 61% multiplied by the market price (as defined in the note). Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature does not meet the definition of a derivative during the first 180 days but will meet the definition of a derivative when the conversion price becomes variable and would at that time require bifurcation and to be accounted for as a derivative liability.

On March 14, 2019, the Company entered into a 12% convertible note for the principal amount of $118,000 with JSJ Investments, Inc, which matures on March 14, 2020, and has a $5,000 OID. The holder will also deduct $13,000 from the purchase price for legal and due diligence fees. The note is convertible commencing 180 days after issuance of the note (or upon an event of Default), with a variable conversion rate at 60% of market price (as defined in the note). The conversion rate adjusts if there are common stock equivalents issued and in which the aggregate per share price is below the original conversion price, in which case the adjusted conversion price is the lower of the original conversion price or 25% of the aggregate price. The discount increases to a 55% discount if there is a DTC “chill” in effect and an additional 5% if the Company is not DWAC or DTC eligible, as well as an additional 5% discount for each event of default. The debenture also includes various liquidated damages for various events, as set forth in the agreement, such as the Company’s inability or delay in the timely issuance of the shares upon receipt of a conversion request. In an event of default, as defined in the note, the “default amount” shall be calculated at the product of (A) the then outstanding principal amount of the note, plus accrued interest, divided by (B) the conversion price as determined on the issuance date, multiplied by (C)the highest price at which the common stock traded at any time between the issuance date and the date of the event of default. Per the agreement, the Company is required at all times to have authorized and reserved eight times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 135% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture, and at 150% after 180 days. The conversion feature meets the definition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability on the date the note becomes convertible, either 180 days after issuance or upon an event of default.

16

On March 25, 2019, the Company executed an 8% convertible promissory note payable to Belridge Capital L.P. in the principal amount of $137,500, for a purchase price of $125,000, which is due on March 24, 2020. In an event of default as set forth in the note, the interest rate increases to a default amount of 18%, and the default sum due becomes 130% of the principal outstanding and accrued interest (the “default redemption amount”). Alternatively, at the election of the holder, the Holder may require the Company to redeem all or part of the default redemption amount through the issuance of such number of shares of common stock equal to (x) the default redemption amount, divided by (y) or 55% of the lowest traded price in the 20 trading days prior to the conversion date. The note is convertible into shares of common stock at a conversion price of the lower of (i) $1.00 per share or (ii) 61% of the lowest trading price for the 20 prior trading days prior to the conversion date. Per the agreement, the Company is required at all times to have authorized and reserved three times the number of shares that is actually issuable upon full conversion of the note. The Company may redeem the note at any time the note is outstanding and there is not an event of default, at amounts ranging in the first 90 days from the date of issuance from 115% to 135% of the principal and accrued interest balance, based on the redemption date’s passage of time. The note also includes a “most favored nation” clause, whereby when the Company enters into any future financing transactions with a third-party investor, the Company must provide the holder notification of the terms of the new financing transaction, and if the holder determines that the terms of the subsequent investment are preferable to the original terms of the March 25, 2019 convertible promissory note, the original terms of the note will be amended and restated, which may include the conversion terms. The conversion feature meets the definition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability.

The Company estimated the fair value of the conversion feature derivative embedded in the debenture at issuance at $165,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.46 at issuance date; a risk-free interest rate of 2.41% and expected volatility of the Company’s common stock, of 181.78%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $27,500 was immediately expensed as financing costs.

On October 11, 2018, the Company entered into a convertible note with Armada Investment Fund LLC for the principal amount of $55,000, convertible into shares of common stock of the Company, which matures on July 11, 2019. The note bears interest at 8%, which increases to 24% upon an event of default. In an event of default as set forth in the note, the default sum becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. As of December 31, 2018, the note was in default due to the Company being delinquent in their filings under the Exchange Act with the SEC, and therefore the note principal balance was increased by $27,500. As a result the outstanding balance of the note as of December 31, 2018, was $82,500. The note is convertible at the lesser of: (i) $1.75; and (ii) 65% multiplied by lowest end of day VWAP during the previous 20 days before the Issue date of the note, and (iii) 65% multiplied by the market price (as defined in the note. The conversion price shall be adjusted upon subsequent sales of securities at a price lower than the original conversion price. The discount is increased to 50% if the Company is not DTC eligible, or if the conversion price falls to below $0.01, and the principal amount of the note shall increase by $15,000. Additionally, if the Company enters into a Section 3(a)(9) or 3(a)(10) transaction, there shall be liquidation damages of 25% of the outstanding principal balance of the debt, but not to be less than $15,000. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time ranging from the date of issuance of the debenture. The conversion feature meets the definition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability on the date the note becomes convertible.

In connection with the Armada note, the Company issued 150,000 warrants, exercisable at $0.34, with a five year term. The Company estimated the fair value of the warrants using the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.27 at issuance date; a risk-free interest rate of 3.0% and expected volatility of the Company’s common stock, of 158.6%, resulting in a fair value of $37,000.

17 

 

 

For a public business entity, the amendments in ASU 2014-09 (including the amendments introduced through recent ASU’s) are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period (the first quarter of fiscal year 2018 for the Company). Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

The Company intends to adopt ASU 2014-09 asestimated the aggregate fair value of January 1, 2018.

The Company isthe conversion feature derivatives embedded in the processdebenture at issuance at $70,000, based on weighted probabilities of evaluatingassumptions used in the impact of ASU 2014-09 on its revenue streams and selling contracts, if any, and on its financial reporting and disclosures. Management is expecting to complete the evaluationBlack Scholes pricing model. The key valuation assumptions used consist, in part, of the impactprice of the accountingCompany’s common stock of $0.27 at issuance date; a risk-free interest rate of 2.66% and disclosure changes onexpected volatility of the business processes, controlsCompany’s common stock, of 141.14%, and systems throughout 2017. Since the Company did not report so far, material revenues, management believes thatvarious estimated reset exercise prices weighted by probability. This resulted in the adoptioncalculated fair value of ASU 2014-09 will not have significant impact on its financial statements.

2. Stockholders’ Equitythe debt discount being greater than the face amount of the debt, and the excess amount of $52,000 was immediately expensed as financing costs.

 

On January 15, 2016, we amended our certificate of incorporation to increase authorized capital to include 10 million shares of $.0001 par value preferred shares. No preferred shares have been issued.

Issuance of Shares of Common Stock as of September 30, 2017:

During the three months ended September 30, 2017,October 11, 2018, the Company authorizedentered into a convertible note with BHP Capital NY Inc. for the issuanceprincipal amount of 181,818$55,000, convertible into shares of common stock for cashof the Company, which matures on July 11, 2019. The note bears interest at $1.10 per share for a total8%, which increases to be earned24% upon an event of $200,000.default. In an event of default as set forth in the note, the default sum becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. As of September 30, 2017 none of these shares have been issued and outstanding even thoughDecember 31, 2018, the note was in default due to the Company received $50,000being delinquent in their filings under the Exchange Act with respect to these shares.the SEC, and therefore the note principal balance was increased by $27,500. As a result the Company recorded $50,000 in stock payableoutstanding balance of the note as of September 30, 2017.

December 31, 2018, was $82,500. The note is convertible at the lesser of: (i) $1.75; and (ii) 65% multiplied by lowest end of day VWAP during the previous 20 days before the Issue date of the note, and (iii) 65% multiplied by the market price (as defined in the note. The conversion price shall be adjusted upon subsequent sales of securities at a price lower than the original conversion price. The discount is increased to 50% if the Company is not DTC eligible, or if the conversion price falls to below $0.01, and the principal amount of the note shall increase by $15,000. Additionally, if the Company enters into a Section 3(a)(9) or 3(a)(10) transaction, there shall be liquidation damages of 25% of the outstanding principal balance of the debt, but not to be less than $15,000. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the three months ended September 30, 2017,first 180 days the convertible redeemable note is in effect, the Company authorizedmay redeem the issuancenote at amounts ranging from 115% to 145% of 80,000 sharesthe principal and accrued interest balance, based on the redemption date’s passage of common stock valued at $1.60 per share to Ace Legends Pte Ltd. for services provided. As of September 30, 2017 none of these shares have been issued and outstanding. As a result, the Company recorded $128,000 in stock payable as of September 30, 2017.

Debt Conversion into Shares of Common Stock

During the nine months ended September 30, 2017, the Company agreed to convert $100,000 in debt into 200,000 shares of common stock and 200,000 warrants. The debt was non-convertible, and the borrowings took place on May 7, 2017, but were subsequently fully converted on May 23, 2017. In addition, the Company incurred a loss of $442,697 in connection with the debt conversion, which was recorded as additional paid-in capital.

Common Stock and Warrants Issued for Cash

During the nine months ended September 30, 2017, the Company received $902,000 through a placement of 1,359,000 common stock units to investors for an offering price of $0.50 and $1.00 per unit. Each unit consisted of one share of common stock and one warrant to purchase common stock. The 1,214,000 warrants are exercisable at $2.00 and $1.00 and expire one yeartime ranging from the date of issuance.issuance of the debenture. The warrants were valued usingconversion feature meets the Black-Scholes pricing model to estimatedefinition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability on the relative fair value of $781,714. The Black-Sholes-Merton pricing model assumptions used are as follows: expected dividend yield of 0%; risk-free interest rate of 1.36%; expected volatility between 179% and 181%, and warrant exercise period based upondate the stated terms. The warrants were classified within stockholders’ equity.note becomes convertible.

 

Stock-Based Compensation

DuringIn connection with the nine months ended September 30, 2017,BHP note, the Company issued 1,475,000 fully vested shares of the150,000 warrants, exercisable at $0.34, with a five year term. The Company common stock and 1,900,000 warrants to consultants as payment for services. As the equity instruments issued are fully vested and non-forfeitable,estimated the fair value of the grantswarrants using the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.27 at issuance date; a risk-free interest rate of 3.0% and expected volatility of the Company’s common stock, of 158.6%, resulting in a fair value of $37,000.

The Company estimated the aggregate fair value of the conversion feature derivatives embedded in the debenture at issuance at $70,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.27 at issuance date; a risk-free interest rate of 2.66% and expected volatility of the Company’s common stock, of 141.14%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $52,000 was recognizedimmediately expensed as financing costs.

On October 11, 2018, the Company entered into a convertible note with Jefferson Street Capital, LLC for the principal amount of $55,000, convertible into shares of common stock of the Company, which matures on July 11, 2019. The note bears interest at 8%, which increases to 24% upon an increase additional paid-in capitalevent of default. In an event of default as set forth in the note, the default sum becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. As of December 31, 2018, the note was in default due to the Company being delinquent in their filings under the Exchange Act with the SEC, and therefore the note principal balance was increased by $27,500. As a result the outstanding balance of the note as of December 31, 2018, was $82,500. The note is convertible at the measurement date.lesser of: (i) $1.75; and (ii) 65% multiplied by lowest end of day VWAP during the previous 20 days before the Issue date of the note, and (iii) 65% multiplied by the market price (as defined in the note. The conversion price shall be adjusted upon subsequent sales of securities at a price lower than the original conversion price. The discount is increased to 50% if the Company is not DTC eligible, or if the conversion price falls to below $0.01, and the principal amount of the note shall increase by $15,000. Additionally, if the Company enters into a Section 3(a)(9) or 3(a)(10) transaction, there shall be liquidation damages of 25% of the outstanding principal balance of the debt, but not to be less than $15,000. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares were valuedthat is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 145% of the closing price asprincipal and accrued interest balance, based on the redemption date’s passage of time ranging from the date of issuance of the underlying agreements (ranging from $0.65 to $2.93).debenture. The conversion feature meets the definition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability on the date the note becomes convertible.

 

 F-1118 

 

In connection with the Jefferson note, the Company issued 150,000 warrants, exercisable at $0.34, with a five year term. The Company estimated the fair value of the warrants using the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.27 at issuance date; a risk-free interest rate of 3.0% and expected volatility of the Company’s common stock, of 158.6%, resulting in a fair value of $37,000.

The Company estimated the aggregate fair value of the conversion feature derivatives embedded in the debenture at issuance at $70,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.27 at issuance date; a risk-free interest rate of 2.66% and expected volatility of the Company’s common stock, of 141.14%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $52,000 was immediately expensed as financing costs.

On October 16, 2018, the Company entered into a 12% convertible note with Power Up Lending for the principal amount of $43,000, convertible into shares of common stock of the Company, which matures on July 30, 2019. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note was in default due to the Company being delinquent in their filings under the Exchange Act, and therefore the principal was increased 50%, to $64,500, with the increase being recognized as a penalty expense in the accompanying Statement of Operations. The note is convertible during first 180 days after issuance at a fixed conversion price of $1.75. After the initial conversion period, the conversion price shall equal the lesser of: (i) the fixed price; and (ii) 65% multiplied by the market price (as defined in the note). The conversion feature does not meet the definition of a derivative during the first 180 days but will meet the definition of a derivative when the conversion price becomes variable and will at that time require bifurcation and to be accounted for as a derivative liability. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note.

On October 29, 2018, the Company entered into a 12% convertible note for the principal amount of $118,000 with JSJ Investments, Inc, which matures on October 29, 2019, and has a $5,000 OID. The note is convertible commencing 180 days after issuance of the note (or upon an event of Default), with a variable conversion rate at 60% of market price (as defined in the note). The conversion rate adjusts if there are common stock equivalents issued and in which the aggregate per share price is below the original conversion price, in which case the adjusted conversion price is the lower of the original conversion price or 25% of the aggregate price. The discount increases to a 55% discount if there is a DTC “chill” in effect and an additional 5% if the Company is not DWAC or DTC eligible, as well as an additional 5% discount for each event of default. The debenture also includes various liquidated damages for various events, as set forth in the agreement, such as the Company’s inability or delay in the timely issuance of the shares upon receipt of a conversion request. Per the agreement, the Company is required at all times to have authorized and reserved eight times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 135% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture, and at 150% after 180 days. The conversion feature meets the definition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability on the date the note becomes convertible, either 180 days after issuance or upon an event of default.

19

On October 31, 2018, the Company entered into a 12% convertible promissory note in the principal amount of $150,000 with Auctus Funds, which matures on July 31, 2019. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. As of December 31, 2018, the note was in default due to the Company being delinquent in their filings under the Exchange Act with the SEC, and therefore the note principal balance was increased by $75,000. As a result, the outstanding balance of the note as of December 31, 2018, was $225,000. The note is convertible at a variable conversion rate lessor of (i) lowest closing price during the previous 25 trading day period, prior to the date of note and (ii) the variable price, which is 60% by market price (lowest closing price for 25 days prior to conversion). The discount increases by 15% discount if there is a DTC “chill” in effect., and an additional 10% if the Company is not DWAC eligible. Additionally, if the Company enters into a Section 3(a)(9) or 3(a)(10) transaction, there shall be liquidation damages of 25% of the outstanding principal balance of the debt, but not to be less than $15,000. The conversion price is adjusted if any 3rd party has the right to convert monies at a discount to market greater than the conversion price in effect at that time then the holder, may utilize such greater discount percentage. Per the agreement, the Company is required at all times to have authorized and reserved ten times the number of shares that is actually issuable upon full conversion of the note. If the Company does not maintain the reserve shares or fails to replenish then within 3 days of request, the principal balance increases by $5,000. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 135% to 150% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature meets the definition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability on the date the note becomes convertible.

In connection with the Auctus note, the Company issued 375,000 warrants, exercisable at $0.20, with a five year term. The Company estimated the fair value of the warrants using the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.24 at issuance date; a risk-free interest rate of 2.91% and expected volatility of the Company’s common stock, of 158.6%, resulting in a fair value of $83,000.

The Company estimated the fair value of the conversion feature derivative embedded in the debenture at issuance at $214,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.09 at issuance date; a risk-free interest rate of 2.24% and expected volatility of the Company’s common stock, of 272.06%, and the various estimated reset exercise prices weighted by probability. This plus the fair value of the warrants resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $147,000 was immediately expensed as financing costs.

On October 31, 2018, the Company entered into a 12% convertible promissory note in the principal amount of $150,000 with EMA Financial LLC, which matures on July 31, 2019. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 200% of the principal outstanding and accrued interest. Additionally, if the market price of the Company’s common stock falls below $0.01, the principal shall increase by $25,000. As of December 31, 2018, the note was in default due to the Company being delinquent in their filings under the Exchange Act with the SEC, and therefore the note principal balance was increased by $150,000. As a result, the outstanding balance of the note as of December 31, 2018, was $300,000. The note is convertible at a variable conversion rate lessor of (i) the closing price on the day preceding the issue date and (ii) 60% of either the lowest closing price during 25 days prior to and including the conversion date, or the closing bid price, whichever is lower. The discount increases by 15% discount if there is a DTC “chill” in effect or closing price falls below $0.05875. Additionally, if the Company enters into a Section 3(a)(9) or 3(a)(10) transaction, there shall be liquidation damages of 25% of the outstanding principal balance of the debt, but not to be less than $15,000. Per the agreement, the Company is required at all times to have authorized and reserved ten times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 135% to 150% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature meets the definition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability on the date the note becomes convertible.

20

In connection with the note, the Company issued 312,500 warrants, exercisable at $0.24, with a five year term. The Company estimated the fair value of the warrants using the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.24 at issuance date; a risk-free interest rate of 2.91% and expected volatility of the Company’s common stock, of 158.6%, resulting in a fair value of $68,000.

The Company estimated the fair value of the conversion feature derivative embedded in the debenture at issuance at $214,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.09 at issuance date; a risk-free interest rate of 2.24% and expected volatility of the Company’s common stock, of 272.06%, and the various estimated reset exercise prices weighted by probability. This plus the fair value of the warrants resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $132,000 was immediately expensed as financing costs.

On December 3, 2018, the Company entered into a 12% convertible note with Power Up Lending, for the principal amount of $53,000, convertible into shares of common stock of the Company, which matures on September 15, 2019. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible during first 180 days after issuance at a fixed conversion price of $1.75. After the initial conversion period, the conversion price shall equal the lesser of: (i) the fixed price; and (ii) 65% multiplied by the market price (as defined in the note). Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature does not meet the definition of a derivative during the first 180 days but will meet the definition of a derivative when the conversion price becomes variable and will at that time require bifurcation and to be accounted for as a derivative liability.

On May 1, 2018, the Company executed an 12% fixed convertible promissory note payable to Power Up Lending, LLC in the principal amount of $53,000, which note was due on November 1, 2018. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. As of December 2018, when converted as discussed below, the note was in default due to the Company being delinquent in their filings under the Exchange Act with the SEC, and therefore the note principal balance was increased by $26,500. As a result the balance of the note was $79,500. The note is convertible for 180 days from inception into shares of Common Stock at a conversion price of $1.75 per share, subject to adjustment based upon the terms of the note. After the 180 days the conversion price shall equal the lesser of: (i) $1.75; and (ii) 65% multiplied by the market price, as defined in the agreement. Therefore, as of November 1, 2018, the conversion feature met the definition of a derivative and required bifurcation and to be accounted for as a derivative liability. The Company estimated the fair value of the conversion feature derivative embedded in the debenture at issuance at $68,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used as of the date the derivative was recognized consist, in part, of the price of the Company’s common stock of $0.24; a risk-free interest rate of 2.60% and expected volatility of the Company’s common stock, of 141.14%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $15,000 was immediately expensed as financing costs. The note was fully converted on several dates in February 2019, at which time the derivative fair value of $61,000 relating to the conversion feature was reclassified to equity. The derivative was revalued prior to reclassification with the key valuations assumptions consisting, in part, of the price of the Company’s common stock of $0.20; a risk-free interest rate of 2.45% and expected volatility of the Company’s common stock, of 178.15%, and the various estimated reset exercise prices weighted by probability.

21

On June 13, 2018, the Company executed a 10% convertible promissory note payable to Crown Bridge Partners in the principal amount of $225,000, with an OID of $22,500. The first tranche of the note, in the principal amount of $75,000, with an OID of $7,500 for net cash receipt of $67,500, was paid at closing. Crown Bridge Partners may pay, in its sole discretion, such additional amounts of the consideration and at such dates as the holder may choose in its sole discretion. On August 21, 2018, a second tranche, for a 10% convertible promissory note in the amount of $25,000 was executed. On January 10, 2019, a third tranche, for a 10% convertible promissory note in the amount of $50,000 was executed. On February 15, 2019, a third tranche, for a 10% convertible promissory note in the amount of $35,000 was executed. Each tranche shall be due twelve months after payment. In an event of default as set forth in the note, the interest rate increases to a default amount of 15%, and the default sum due becomes 150% of the principal outstanding and accrued interest. As of December 31, 2018, the note was in default due to the Company being delinquent in their filings under the Exchange Act with the SEC, and therefore the note principal balance on the first tranche was increased by $37,500. As a result, the outstanding balance of the first tranche as of December 31, 2018, was $112,500. The note principal balance on the second tranche was increased by $12,500. As a result, the outstanding balance of the second tranche as of December 31, 2018, was $37,500. The note is convertible at a variable conversion rate of 65% of the lowest closing price during 20 days prior to the conversion date. If at any time while the note is outstanding, the conversion price is equal to or lower than $0.50, then an additional fifteen percent (15%) discount shall be factored into the conversion price. The discount will also be increased by 10% if the Company’s common shares are not DTC deliverable. Additionally, if the Company fails to comply with the reporting requirements of the Exchange Act (including but not limited to becoming late or delinquent in its filings, even if the Company subsequently cures such delinquency), the discount shall be increased an additional 15%. Per the agreement, the Company is required at all times to have authorized and reserved ten times the number of shares that is actually issuable upon full conversion of the note. The conversion feature met the definition of a derivative and required bifurcation and to be accounted for as a derivative liability.

The Company estimated the fair value of the conversion feature derivative embedded in the first tranche at issuance at $100,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used as of the date the derivative was recognized consist, in part, of the price of the Company’s common stock of $0.20; a risk-free interest rate of 2.69% and expected volatility of the Company’s common stock, of 158.40%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $25,000 was immediately expensed as financing costs.

The Company estimated the fair value of the conversion feature derivative embedded in the second tranche at issuance at $36,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used as of the date the derivative was recognized consist, in part, of the price of the Company’s common stock of $0.46; a risk-free interest rate of 2.45% and expected volatility of the Company’s common stock, of 167.29%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $11,000 was immediately expensed as financing costs.

The Company estimated the fair value of the conversion feature derivative embedded in the third tranche at issuance at $50,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used as of the date the derivative was recognized consist, in part, of the price of the Company’s common stock of $0.46; a risk-free interest rate of 2.45% and expected volatility of the Company’s common stock, of 167.29%, and the various estimated reset exercise prices weighted by probability.

The Company estimated the fair value of the conversion feature derivative embedded in the fourth tranche at issuance at $39,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used as of the date the derivative was recognized consist, in part, of the price of the Company’s common stock of $0.46; a risk-free interest rate of 2.45% and expected volatility of the Company’s common stock, of 167.29%, and the various estimated reset exercise prices weighted by probability. This, and the $15,000 fair value of the warrants issued, resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $19,000 was immediately expensed as financing costs.

22

In connection with the fourth tranche, the Company issued 66,666 warrants, exercisable at $0.75, with a five year term. The Company estimated the fair value of the warrants using the Black Scholes pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.26 at issuance date; a risk-free interest rate of 2.23% and expected volatility of the Company’s common stock, of 158.6%, resulting in a fair value of $15,000.

At four various dates during January 2019, the holder fully converted the $112,500 principal plus $5,370 of accrued interest and $2,000 of fees, of the first tranche, into 2,148,368 shares of common stock of the Company, at a conversion price of $0.06. At conversion the derivative fair value of $173,000 relating to the conversion feature was reclassified to equity. The derivative was revalued prior to reclassification, with an increase in fair value of $24,000 with the key valuations assumptions consisting, in part, of the price of the Company’s common stock on the date of conversion; a risk-free interest rate of 2.47% and expected volatility of the Company’s common stock, of 158.11%, and the various estimated reset exercise prices weighted by probability. Upon conversion the remaining unamortized debt discount was also immediately expensed.

At three various dates during January and February 2019, the holder converted $31,008 of the principal of the second tranche, leaving approximately $6,500 of principal outstanding at March 31, 2019, into 548,001 shares of common stock of the Company, at a conversion price of $0.06. At conversion the derivative fair value of $88,000 relating to the conversion feature was reclassified to equity. The derivative was revalued prior to reclassification with an increase in fair value of $55,000 with the key valuations assumptions consisting, in part, of the price of the Company’s common stock on the date of conversion; a risk-free interest rate of 2.51% and expected volatility of the Company’s common stock, of 189.34%, and the various estimated reset exercise prices weighted by probability. Upon conversion the remaining unamortized debt discount was also immediately expensed.

On July 27, 2018, the Company executed an 8% fixed back-end convertible promissory note payable to Crossover Capital Fund I, LLC in the principal amount of $115,000, and is due on March 27, 2019. The note is convertible into shares of Common Stock at a conversion price of $1.30 per share if converted within 5 months, or thereafter the conversion price shall be equal to the lower of (i) the fixed price or (ii) 65% of the average of the two (2) lowest trading prices of the Common Stock as reported on the National Quotations Bureau OTC market on which the Company’s shares are traded, for the twenty (20) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. The conversion feature does not meet the definition of a derivative during the first 180 days but will meet the definition of a derivative when the conversion price becomes variable and will at that time require bifurcation and to be accounted for as a derivative liability.

On January 24, 2019 the Company recognized the derivative liability. The Company estimated the fair value of the conversion feature derivative embedded in the debenture at $119,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used as of the date the derivative was recognized consist, in part, of the price of the Company’s common stock of $0.41; a risk-free interest rate of 2.42% and expected volatility of the Company’s common stock, of 317.80%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $4,000 was immediately expensed as financing costs.

On January 24, 2019, the holder converted approximately $114,000 principal plus $2,262 of accrued interest into 1,460,000 shares of common stock of the Company, at a conversion price of $0.08, leaving a principal balance of approximately $1,000 outstanding as of March 31, 2019. At conversion the derivative fair value of $109,000 relating to the conversion feature was reclassified to equity. The derivative was revalued prior to reclassification with a decrease in fair value of $10,000 with the key valuations assumptions consisting, in part, of the price of the Company’s common stock on the date of conversion; a risk-free interest rate of 2.50% and expected volatility of the Company’s common stock, of 189.34%, and the various estimated reset exercise prices weighted by probability. Upon conversion the remaining unamortized debt discount was also immediately expensed.

23

On July 19, 2018, the Company entered into two 10% convertible redeemable notes to GS Capital in the aggregate principal amount of $250,000, convertible into shares of common stock of the Company, with maturity dates of July 19, 2019. Each note was in the face amount of $125,000, with an original issue discount of $5,000, resulting in a purchase price for each note of $120,000. The first of the two notes was paid for by the buyer in cash upon closing, with the second note initially paid for by the issuance of an offsetting $120,000 secured promissory note issued to the Company by the buyer (“Buyer Note”). The notes are convertible beginning six months after issuance, at the lower of (i) $0.60 or (ii) 65% of the lowest of trading price for last 20 days, with the discount increased to 45% in the event of a DTC chill. The second note is not convertible until the buyer has settled the Buyer Note in cash payment, which must be funded by March 20, 2019. The Buyer Note was funded on January 17, 2019, for gross proceeds of $114,000. The Buyer Note is included in Notes Receivable in the accompanying financial statements as of December 31, 2018. During the first six months, the convertible redeemable notes are in effect, the Company may redeem the note at amounts ranging from 113% to 137% of the principal and accrued interest balance, based on the redemption date’s passage of time ranging from 60 days to 180 days from the date of issuance of each debenture. The conversion feature does not meet the definition of a derivative during the first six months, but will meet the definition of a derivative when the conversion price becomes variable and would at that time require bifurcation and to be accounted for as a derivative liability

On January 20, 2019 the Company recognized the derivative liability related to the two notes. The Company estimated the fair value of the conversion feature derivative embedded in the debentures at $237,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used as of the date the derivative was recognized consist, in part, of the price of the Company’s common stock of $0.64; a risk-free interest rate of 2.51% and expected volatility of the Company’s common stock, of 189.34%, and the various estimated reset exercise prices weighted by probability.

On two dates during January and February 2019, the holder fully converted the $125,000 principal plus $6,331 of accrued interest, into 1,572,550 shares of common stock of the Company, at conversion prices ranging from $.08 to $0.12. At conversion the derivative fair value of $84,000 relating to the conversion feature was reclassified to equity. The derivative was revalued prior to reclassification with an decrease in fair value of $30,000 with the key valuations assumptions consisting, in part, of the price of the Company’s common stock on the date of conversion; a risk-free interest rate of 2.51% and expected volatility of the Company’s common stock, of 189.34%, and the various estimated reset exercise prices weighted by probability. Upon conversion the remaining unamortized debt discount was also immediately expensed.

On February 6, 2019, the holder fully converted the $125,000 principal of the back-end note, into 709,837 shares of common stock of the Company at a conversion price of $0.18. At conversion the derivative fair value of $88,000 relating to the conversion feature was reclassified to equity. The derivative was revalued prior to reclassification with a decrease in fair value of $35,000 with the key valuations assumptions consisting, in part, of the price of the Company’s common stock of $0.65; a risk-free interest rate of 2.50% and expected volatility of the Company’s common stock, of 211.48%, and the various estimated reset exercise prices weighted by probability. Upon conversion the remaining unamortized debt discount was also immediately expensed.

On July 30, 2018, the Company executed an 12% fixed convertible promissory note payable to Power Up Lending, LLC in the principal amount of $53,000, and is due on May 15, 2019. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. As of December 31, 2018, the note was in default due to the Company being delinquent in their filings under the Exchange Act with the SEC, and therefore the note principal balance was increased by $26,500. As a result, the outstanding balance of the note as of December 31, 2018, was $79,500. The note is convertible for 180 days from inception into shares of Common Stock at a conversion price of $1.75 per share, subject to adjustment based upon the terms of the note. After the 180 days the conversion price shall equal the lesser of: (i) $1.75; and (ii) 65% multiplied by the market price, as defined in the agreement. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature does not meet the definition of a derivative during the first 180 days, but will meet the definition of a derivative when the conversion price becomes variable and would at that time require bifurcation and to be accounted for as a derivative liability.

24

On January 30, 2019 the Company recognized the derivative liability. The Company estimated the fair value of the conversion feature derivative embedded in the debenture at $82,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used as of the date the derivative was recognized consist, in part, of the price of the Company’s common stock of $0.67; a risk-free interest rate of 2.42% and expected volatility of the Company’s common stock, of 317.80%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $2,400 was immediately expensed as financing costs.

On two dates during February 2019, the holder fully converted the $79,500 principal plus $3,180 of accrued interest, into 361,869 shares of common stock of the Company, at conversion prices ranging from $.21 to $0.25. At conversion the derivative fair value of $68,000 relating to the conversion feature was reclassified to equity. The derivative was revalued prior to reclassification with a decrease in fair value of $14,000 with the key valuations assumptions consisting, in part, of the price of the Company’s common stock on the date of conversion; a risk-free interest rate of 2.40% and expected volatility of the Company’s common stock, of 222.18%, and the various estimated reset exercise prices weighted by probability. Upon conversion the remaining unamortized debt discount was also immediately expensed.

On September 11, 2018, the Company executed an 12% fixed convertible promissory note payable to Power Up Lending, LLC in the principal amount of $53,000, due on June 30, 2019. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible for 180 days from inception into shares of Common Stock at a conversion price of $1.75 per share, subject to adjustment based upon the terms of the note. After the 180 days the conversion price shall equal the lesser of: (i) $1.75; and (ii) 65% multiplied by the market price, as defined in the agreement. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature does not meet the definition of a derivative during the first 180 days, but will meet the definition of a derivative when the conversion price becomes variable and would at that time require bifurcation and to be accounted for as a derivative liability.

On March 11, 2019 the Company recognized the derivative liability. The Company estimated the fair value of the conversion feature derivative embedded in the debenture at $68,000, based on weighted probabilities of assumptions used in the Black Scholes pricing model. The key valuation assumptions used as of the date the derivative was recognized consist, in part, of the price of the Company’s common stock of $0.50; a risk-free interest rate of 2.46% and expected volatility of the Company’s common stock, of 222.18%, and the various estimated reset exercise prices weighted by probability

On two dates during March 2019, the holder fully converted the $79,500 principal into 295,327 shares of common stock of the Company, at conversion prices ranging from $.27 to $0.29. At conversion the derivative fair value of $61,000 relating to the conversion feature was reclassified to equity. The derivative was revalued prior to reclassification with an increase in fair value of $68,000 with the key valuations assumptions consisting, in part, of the price of the Company’s common stock of on the date of conversion; a risk-free interest rate of 2.45% and expected volatility of the Company’s common stock, of 222.18%, and the various estimated reset exercise prices weighted by probability. Upon conversion the remaining unamortized debt discount was also immediately expensed.

25

On November 9, 2017, the Company executed a 10% fixed convertible promissory note payable to Tangiers Global LLC in the principal amount of $330,000. The note, which is due seven and a half months from the date of effective date of payment, was funded by the investor in the initial sum of $150,000, net of a $15,000 OID on November 15, 2017 and $150,000, net of a $15,000 OID on December 19, 2017. The note is convertible into shares of Common Stock at a conversion price of $1.30 per share if converted within 8 months, or thereafter the conversion price shall be equal to the lower of (i) the fixed price or (ii) 65% of the average of the two (2) lowest trading prices of the Common Stock as reported on the National Quotations Bureau OTC market on which the Company’s shares are traded, for the twenty (20) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. On four occasions during July through December 2018 the holder converted $320,000 of the note into 1,544,834 shares of the Company’s common shares at conversion prices ranging from $0.50 to $0.08. On January 4, 2019 the holder converted the remaining $10,000 principal plus $22,727 of accrued interest and penalties into 416,114 shares of commons stock of the Company, at a conversion price of $0.08.

The Tangiers Global fixed convertible promissory notes payable and the commitment fee note are guaranteed an interest payment of 10% of the beginning note balance. As such, the Company had to immediately expense the balances during 2017.

In accordance with ASC 470, the Company has analyzed the beneficial nature of the initial conversion terms of the fixed convertible notes issued and in the year ended December 31, 2017 determined that a beneficial conversion feature (“BCF”) exists because the effective conversion price was lower than the quoted market price at the time of the issuance. There was no BCF necessary to recognize in the three months ended March 31, 2019, as the majority of stock prices were in excess of the quoted market price at the time of issuance, or the conversion feature, as discussed above, was required to be bifurcated and accounted for as a derivative liability.

The derivative liability arising from all of the above discussed debentures was revalued at March 31, 2019, resulting in a decrease of the fair value of the remaining derivative liability of $449,000 for the three months ended March 31, 2019. During the three months ended March 31, 2019, there was a reclass of $678,000 of the derivative fair value to equity upon the conversions of approximately $666,500 of principal, and a decrease in the fair value of $10,000 immediately prior to conversion. The key valuation assumptions used as of December 31, 2018 consist, in part, of the price of the Company’s common stock of $0.55; a risk-free interest rate of 2.40% and expected volatility of the Company’s common stock ranging from 176.09% to 181.78%, and the various estimated reset exercise prices weighted by probability. There was not a derivative liability as of March 31, 2018.

As the conversion features on specified notes have variable conversion prices with no stated floor, the warrants issued with the units purchased as well as certain convertible notes, were required to be classified out of equity as liabilities in October 2018, when the first conversion feature triggered liability classification of the warrants outstanding. The warrant liability was revalued at March 31, 2019, resulting in an increase of the fair value of the warrant liability of $1,029,000 for the three months ended March 31, 2019. The key valuation assumptions used as of March 31, 2019 consist, in part, of the price of the Company’s common stock of $0.55; a risk-free interest rate ranging from 2.23% to 2.51% and expected volatility of the Company’s common stock ranging from 158.6% to 222.2%.

As of March 31, 2019 and December 31, 2018, the Company has reserved approximately 226,527,220 and 126,142,000 shares underlying the convertible notes and warrants per the terms of the agreements, as discussed above.

For the three months ended March 31, 2019 and 2018, the Company has recognized approximately $62,000 and $10,000 in interest expense related to the notes as described above.

26

Note 6 - Related Party Transactions

On August 31, 2018, the Company acquired 100% of the outstanding shares of its licensor, PT. Kinerja, which had previously issued the Company, as licensee, the exclusive license of the Company’s IP technology. (Note 1) At the date of the closing of the acquisition, PT. Kinerja had 18 million shares issued and outstanding, of which 75% or 13.5 million the shares were owned by the CEO of the Company. The consideration for the acquisition was $1,200,000, to be paid by a promissory note which was issued by the Company to PT Kinerja shareholders, all related parties. The promissory note (the “Note”) bears interest at the rate of 6% per annum and is due twenty-four months from the date of the agreement. As part of the acquisition, the Company terminated its Service agreement dated February 20, 2016, with PT Kinerja. In accordance withASC 805-50-30-5,Transactions Between Entities Under Common Control, asthe Company’s CEO and sole director was in control of both the Company and PT. Kinerja, the acquisition was accounted for under common control accounting, and therefore the assets acquired and liabilities assumed were recognized at their historical cost basis. During the three months ended March 31, 2019, approximately $244,000 was paid on the promissory note, resulting in a balance outstanding of $955,616 as of March 31, 2019.

On May 9, 2017, the Company entered into a $50,000 note payable with their CEO and controlling stockholder. The balance is due on demand and accrues interest at 8% per annum. For the three months ending March 31, 2019 and 2018, accrued interest in the amount of approximately $1,000 and $900, respectively was recognized.

Payable to related party consists of the note payable with the Company’s CEO and expenses paid on behalf of the CEO. In addition, during the year ended December 31, 2018, upon the closing of the acquisition the Company assumed the liability of $119,340 owed by the Company’s CEO on the building owned/used by PT. Kinerja. Additionally, the Company assumed an officer loan in the amount of $672,810, which is non-interest bearing and due on demand.

Note 7 - Stockholders’ Equity

Series A Convertible Preferred Stock

On January 2, 2018, the Company issued 400,000 Series A Convertible Preferred Stock to an institutional investor for an aggregate purchase price of $500,000. The total net proceeds to the Registrant for issuance and sale of the Series A Convertible Preferred Stock (the “Preferred Stock”) was $445,000 after payment of due diligence and legal fees related to this transaction. The Series A Convertible Preferred Stock was convertible into 400,000 shares of the Company’s common stock at a conversion price of $1.25 per share. In addition, on January 2, 2018, the Company issued to the institutional investor Class N Warrants exercisable to purchase an additional 400,000 shares on a cashless basis, at an exercise price of $1.25 per Share, during a period of three (3) years from the date of the Agreement. The warrants were valued using the Black-Scholes pricing model to estimate the fair value of $1,051,973$300,772. The key valuation assumptions used consist, in part, of the price of the Company’s common stock on the date of issuance of $2.19; a risk-free interest rate of 1.92% and resultedexpected volatility of the Company’s common stock of 185.51%.

On July 11, 2018, the Company issued to the institutional investor a total of 416,667 shares of common stock, pursuant to a notice of conversion dated July 9, 2018, in connection with the conversion of 200,000 shares of the Series A Convertible Preferred Stock, at an adjusted conversion price of $0.60, which adjustment was subject to an agreement between the Company and the institutional investor. As a result of the modification to the conversion price, the Company recognized a loss on conversion in the amount of $190,255. On January 17, 2019, as a result of an agreement between the Company and the institutional investor to adjust the conversion price to $0.20, the Company issued the holder of the Series A Convertible Preferred Stock 833,333 shares of their common stock as a retroactive modification of the conversion price on the previously conversions. As a result of the additional shares issued, the Company recognized a loss on conversion in the amount of $708,333

On February 22, 2019, the holder of the Series A Convertible Preferred Shares converted an additional 64,000 Series A preferred shares into a total of 400,000 shares of common stock, at the adjusted conversion price of $0.20. As a result of the modification to the conversion price, the Company recognized a loss on conversion in the amount of $198,240. On April 2, 2019, the holder converted the remaining 136,000 Series A Convertible Preferred Shares into a total of 850,000 shares of common stock (See Note 9).

27

Series B Preferred Stock

On September 30, 2018, the Company’s board of directors authorized the designation of a series B preferred stock consisting of 500,000 shares with a par value of $0.0001 per share (the “Series B Preferred Stock”).

The Series B Preferred Stock shall rank senior to the Corporation’s common stock, par value $0.0001 (the “Common Stock”) but junior to any other class or series of the Corporation’s preferred stock hereafter created.

Except as otherwise provided herein or by law and in addition to any right to vote as a separate class as provided by law, the holder of the Series B Preferred Stock shall have full voting rights and powers on all matters subject to a vote by the holders of the Corporation’s Common Stock and shall be entitled to notice of any shareholders meeting in accordance with the Bylaws of the Corporation, and shall be entitled to vote, with respect to any question upon which holders of Common Stock having the right to vote, including, without limitation, the right to vote for the election of directors, voting together with the holders of Common Stock as one class. For so long as Series B Preferred Stock is issued and outstanding, the holders of Series B Preferred Stock shall vote together as a single class with the holders of the Corporation’s Common Stock and the holders of any other class or series of shares entitled to vote with the Common Stock, with the holders of Series B Preferred Stock being entitled to fifty-one percent (51%) of the total votes on all such matters regardless of the actual number of shares of Series B Preferred Stock then outstanding, and the holders of Common Stock and any other shares entitled to vote being entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power.

Unless otherwise declared from time to time by the Board of Directors, the holders of shares of the outstanding shares of Series B Preferred Stock shall not be entitled to receive dividends.

The Series B Preferred Stock were issued on December 17, 2018, with all 500,000 shares issued to the Company’s CEO and Chairman, Edwin Ng. The Company issued the shares to Mr. Ng for the purpose of assuring that he retains voting control of the Company, in expectation of the Company’s plan to expand its business and operations, which will require it to issue significant additional shares. The shares were valued at $871,000, which was recognized as shares issued for services.

Series C Preferred Stock

On October 5, 2018, the Company’s board of directors authorized the designation of a 11% Series C Cumulative Redeemable Perpetual Preferred Stock consisting of 2,000,000 shares with a par value of $0.0001 per share (the “Series C Preferred Stock”). Dividends on the Series C Preferred Stock are cumulative from the date of original issue and will be payable on the fifteenth day of each calendar month when, as and if declared by our board of directors. Dividends will be payable out of amounts legally available therefore at a rate equal to 11% per annum per $25.00 of stated liquidation preference per share, or $2.75 per share of Series C Preferred Stock per year. The Series C Preferred Stock has no stated maturity and will not be subject to any sinking fund or mandatory redemption. Shares of the Series C Preferred Stock will remain outstanding indefinitely unless the Company decides to redeem or otherwise repurchase them. The Company is not required to set aside funds to redeem the Series C Preferred Stock.

Commencing on a date 36 months from the date of original issue of the Series C Preferred Stock, the Company may redeem, at their option, the Series C Preferred Stock, in whole or in part, at a cash redemption price of $25.00 per share, plus all accrued and unpaid dividends to, but not including, the redemption date, upon not less than 30 nor more than 60 days’ written notice (the “Redemption Notice”) to the holders of the Series C Preferred Stock (the “Holders”). The Series C Preferred Stock may also be redeemed upon the occurrence of a Change of Control, at the Company’s option, in whole or in part, within 120 days after the first date on which such Change of Control occurred, for cash at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the redemption date.

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Holders of the Series C Preferred Stock generally will have no voting rights except for limited voting rights if dividends payable on the outstanding Series C Preferred Stock are in arrears for eighteen or more consecutive or non-consecutive monthly dividend periods.

The Series C Preferred Stock has a liquidation preference with the right to receive $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the date of payment, before any payment is made to the holders of our common stock. The Series C Preferred Stock will rank, with respect to rights to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up, (1) senior to all classes or series of our common stock and to all other equity securities issued by us other than equity securities referred to in clauses (2) and (3); (2) on a parity with all equity securities issued by us with terms specifically providing that those equity securities rank on a parity with the Series C Preferred Stock with respect to rights to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up; junior to all equity securities issued by us with terms specifically providing that those equity securities rank senior to the Series C Preferred Stock with respect to rights to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up; and (4) effectively junior to all of our existing and future indebtedness (including indebtedness convertible into our common stock or preferred stock) and to the indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our existing subsidiaries and any future subsidiaries.

As of March 31, 2019, there are no shares of the Series C Preferred Stock issued or outstanding.

Series D Preferred Stock

On December 11, 2018, the Company’s board of directors authorized the designation of a Convertible Preferred Stock consisting of 200,000 shares with a par value of $0.0001 per share (the “Series D Preferred Stock”). The Series D Preferred Stock has no stated maturity and will not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the holders decide to convert. The Series D Preferred Stock is convertible into a number of shares of the Company’s common stock equal to a total of 10% percent of the Company’s outstanding shares of common stock as exists on the date of issuance, on a fully-diluted basis, which includes all shares of common stock underlying convertible debt or other securities of the Company convertible into shares of the Company’s common stock, including shares underlying the shares of Series D Preferred Stock (collectively, the “Convertible Securities”). The Series D Preferred Stock includes anti-dilution protection rights, whereby for a period of 3 years from the date of issuance of the Series D Preferred Stock, and provided that the holder of Series D Preferred Stock shall hold at least 15,000 shares of Series D Preferred Stock, the holder shall be entitled to convert of the shares of Series D Preferred Stock into a number of shares of the Company’s fully-diluted common stock at the date of conversion.

On January 15, 2019, the 200,000 Series D Preferred Shares were issued to the shareholders of FRS Lending, Inc., a Delaware corporation (“FRS”) in consideration for the acquisition by the Company of 100% of the capital stock of FRS, which shall operate on behalf of and provide the Company with services related to the Company’s lending and micro-lending activities and related lending services in the U.S., Indonesia and internationally, which is a newly developing division that the Corporation is planning to devote resources to grow its operations. The fair value of the consideration was calculated at $2,372,945, based on 10% of the fully diluted common shares of the Company as of the date of issuance. FRS did not have any significant tangible assets or liabilities as of the date of acquisition. The agreement also includes an employment agreement with a three-year term. The consideration issued in the acquisition has been recognized as consideration related to the employment agreement and will be amortized over the three-year term of the employment agreement. The current recognitionportion is included in additional consulting services.prepaid expense and the long term portion in other assets, on the accompanying condensed consolidated balance sheet. The Black-Sholesamortization expense for the three months ended March 31, 2019 was $165,000.

The Series D Preferred Stock was evaluated in accordance with ASC 480, to determine if liability classification was warranted. As there are no redemption features, and the variable shares to be issued upon conversion are not based on a fixed monetary amount known at inception, nor is the variation based on something other than the fair value of the Company’s equity shares, the preferred shares are classified in equity. The embedded conversion feature was analyzed to determine if it was required to be bifurcated from the preferred shares and accounted for separately, but as the conversion feature is clearly and closely related to preferred shares, which are an equity host instrument, the conversion feature is not to be bifurcated.

29

Series E Preferred Stock

On December 11, 2018, the Company’s board of directors authorized the designation of a Convertible Preferred Stock consisting of 200,000 shares with a par value of $0.0001 per share (the “Series D Preferred Stock”). The Series D Preferred Stock has no stated maturity and will not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the holders decide to convert. The Series D Preferred Stock is convertible into a number of shares of the Company’s common stock equal to a total of 15% percent of the Company’s outstanding shares of common stock as exists on the date of issuance, on a fully-diluted basis, which includes all shares of common stock underlying convertible debt or other securities of the Company convertible into shares of the Company’s common stock, including shares underlying the shares of Series D Preferred Stock (collectively, the “Convertible Securities”). The Series D Preferred Stock includes anti-dilution protection rights, whereby for a period of 3 years from the date of issuance of the Series D Preferred Stock, and provided that the holder of Series D Preferred Stock shall hold at least 15,000 shares of Series D Preferred Stock, the holder shall be entitled to convert of the shares of Series D Preferred Stock into a number of shares of the Company’s fully-diluted common stock at the date of conversion.

On January 15, 2019, the 200,000 Series E Preferred Shares were issued to Company’s CEO and Chairman, Edwin Ng as compensation for services related to the negotiation with PT. Investa Wahana Group for the commitment agreement for the subscription of preferred stock discussed above. The fair value of the compensation was calculated at $3,559,412, based on 15% of the fully diluted common shares of the Company as of the date of issuance.

The Series E Preferred Stock was evaluated in accordance with ASC 480, to determine if liability classification was warranted. As there are no redemption features, and the variable shares to be issued upon conversion are not based on a fixed monetary amount known at inception, nor is the variation based on something other than the fair value of the Company’s equity shares, the preferred shares are classified in equity. The embedded conversion feature was analyzed to determine if it was required to be bifurcated from the preferred shares and accounted for separately, but as the conversion feature is clearly and closely related to preferred shares, which are an equity host instrument, the conversion feature is not to be bifurcated.

Issuance of Shares of Common Stock and Warrants for cash

On March 19, 2019, the Company received $70,000 through a placement of 140,000 common stock units to an investor for an offering price of $0.50 per unit. Each unit consists of one share of common stock and one warrant to purchase common stock. The 140,000 warrants are exercisable at $1.00 and expire two years from the date of issuance. The warrants were valued at $45,000, using the Black-Scholes pricing model, assumptions used are as follows:with the following assumptions: expected dividend yield of 0%; risk-free interest rate of 1.21%2.23%; expected volatility between 179%170.2%. Due to the conversion features on specified notes having variable conversion prices with no stated floor, the warrants were required to be classified out of equity and 185%, andincluded in warrant exercise period based upon the stated terms.liabilities (Note 5).

 

3. Related Party Transactions not Disclosed ElsewhereIssuance of Shares of Common Stock and Warrants for Services

 

On December 1, 2015,January 10, 2019, the Company entered into an agreement with PT Kinerja Indonesia, an entity organized underissued a total of 3,200,000 restricted shares to various third parties for consulting services valued at $883,200 based upon the laws of Indonesia (“PT Kinerja”), for an exclusive, world-wide license to use and commercially exploit certain KinderjaPay technology and intellectual property. Pursuant to the License Agreement and in consideration for the payment of royalties, the Company has been granted the exclusive, world-wide rights to the KinerjaPay IP, an e-commerce platform that provides users with the convenience of e-commerce services for bill transfer and online shopping. Mr. Ng is the control person of PT Kinerja and a controlling shareholder, CEO and Chairmanmarket price of the Company.

The Company purchases data, prepaid mobile plans, and more from a listshares of vendors that specialize in these transactions. We have a risk of loss as we are buying the plans without the right to return them, therefore we are a principal to the transaction and not an agent. Based upon this, gross revenue treatment appears reasonable for these transactions.

Both PT Kinerja and PT KinerjaPay Indonesia, the Company’s subsidiary created under the laws of Indonesia, are owned and controlled by Mr. Ng, and considered related. All revenue is earned by PT Kinerja, and then transferred to us either gross or net depending$0.28 on the revenue transaction.date of issuance. The fair value of the shares was recognized in Prepaid assets and as the consulting agreements are for a term ending December 31, 2019, the expense will be recognized over the term of the agreement. For the three months ended March 31, 2019, $335,800 was recognized as consulting expense.

 

On February 19, 2016, weJanuary 15, 2019, the Company issued 1,333,333250,000 restricted shares to a third party for consulting services valued at $155,000 based upon the market price of the shares of our common stock to Mr. Ng, our CEO, sole director and control person. Mr. Ng is the sole officer and directors and control person of PT Kinerja, the other party to this agreement, as payment for services as part of a service agreement resulting from the license agreement. The shares were valued at the closing price as of$0.62 on the date of the agreement ($0.9001) and resulted in full recognition of $1,200,133 in consulting services expense. The services provided and to be provided under this service agreement are as follows:issuance.

 

(a) The Service Company shall provide the Company and the Subsidiary with the following services during a term of three (3) years from the date first set forth above (the “Services”), for which the Subsidiary shall pay the Service Company:

I. General Business Services: which shall include personnel, office facilities and equipment, utilities, and related overhead and operational expenses and shall be provided under the direction and control of a designated project manager; and

II. Technical Services: which shall include, but not be limited to, Web Hosting, Web Maintenance, Web Updates and System Upgrades, from time-to-time, which Technical Services will be fulfilled by a minimum of five (5) experienced computer engineers / programmers, one (1) algorithm specialist and two (2) trained technical engineers who shall maintain the servers provided by the Service Company and support the Subsidiary’s full time operations. In addition, the Service Company, in support of the Technical Services, shall guarantee ninety-nine point nine-nine (99.99%) percent uptime of the Company’s domains and applications, and provide all requisite support for the traffic to the Company’s domains with unlimited bandwidth and scalable uplink whenever the traffic to the domains increases, from time-to-time; and

  Shares  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining

Contractual

Term (Years)

 
Outstanding at December 31, 2018  4,278,214  $    1.28         3.3 
Granted  553,166  $0.52   4.2 
Exercised  —         
Expired  (300,000) $.65   4.2 
Outstanding at March 31, 2019  4,531,380  $1.22   3.5 

 

 F-1230 

 

III. R&D Services:

Note 8 - Commitments and Contingencies

On October 4, 2018, the Company entered into a Preliminary Share Sale and Purchase Agreement between PT Kinerjapay Indonesia and PT Mitra Distribusi Utama (“PTMDU”) to acquire PTMDU for Rp40,000,000,000 or approximately $2,758,621. Depending on the amount raised in the Series C Offering discussed below, the Company intends to use $2,500,000 to $3,000,000 for financing the acquisition of PTMDU.

On November 2, 2018, the Company filed a registration statement on Form S-1 for the purpose of offering a total of up to 300,000 shares of its 11% Series C Cumulative Redeemable Perpetual Preferred Stock (“Series C Preferred Stock”), at an Offering price of $25 per share. If the Offering is successful, of which shall include, but notthere can be limitedno assurance, the gross proceeds will be $7.5 million. The Company’s intention is to have these shares of Series C Preferred Stock subject to quotation on the development of new features, products,OTCQB.

We accrue for loss contingencies arising from claims, litigation and other sources when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or services related to the KinerjaPay IP and KinerjaPay.com. Inadditional information becomes available. Legal costs incurred in connection with the R&D Services, the Parties acknowledge that all new KinerjaPay IP that is developed or for which enhancementsloss contingencies are created for KinerjaPay IP already in existence at the date of this Agreement (“Additional IP”) shall belong exclusively to the Company and its Subsidiary. The Parties further agree that in each instance, they will, in “good faith,” negotiate and execute separate, supplemental addendums to this Agreement to address the Services to be provided by the Service Company with respect to the Additional IP.

(b) The Subsidiary shall responsible for the following:

I. Sales and Marketing: PT. KinerjaPay Indonesia shall cover and be directly responsible for all sales and marketing activities and expenses associated with the commercial exploitation of the License for the KinerjaPay IP; and

II. Billing and Collections: PT. KinerjaPay Indonesia shall be responsible for all billing and collections and book all revenues generated by and from commercial exploitation of the License; and　

III. Advertising and Sales Reps: PT. KinerjaPay Indonesia shall at all times maintain a staff of at least three (3) sales reps;　

IV. Office and Administration: PT. KinerjaPay Indonesia shall retain at least one (1) person to provide office/administrative/accounting services to fulfill the duty of Subsidiary in Section 1B(ii) above.

In consideration for the Services to be provided, the Company shall pay or compensate the Service Companyexpensed as follows: (i) Edwin Witarsa Ng, CEO and Chairman - 3,000,000 shares representing 34.77%; (ii)P.T. Starest Asset Management - 640,000 shares representing 7.42%; and (iii) Desa Sebong Lagoi Kec and Teluk Sebong Bintan Kepulauan Riau, Indonesia, 3,000,000 shares representing 34.77%.incurred.

 

The Company shall issue to the Service Company 1,333,333 restricted shares. The restricted shares shallhas no current legal proceeding and did not be deemed fully-paidaccrue any loss for contingencies as of March 31, 2019 and non-assessable until eighteen (18) months from the date first set forth above; and (ii) The Subsidiary, on a quarterly basis, shall pay the Service Company for the services, facilities and personnel provided by the Service Company be at the rate set forth in Appendix A attached hereto; and (iii) The Subsidiary, on a quarterly basis, shall pay the Service Company royalties equal to one (1%) percent of the net revenues generated from the commercial exploitation of the License; and (iv) The Service Company shall be paid a one-time set-up fee of $55,000 within three (3) business days of the execution of this Agreement.December 31, 2018.

As of September 30, 2017, we had $51,849 in accounts payable due to our CEO consisting of a $50,000 loan and $1,849 in expenses paid on behalf of the Company by our CEO. The balance is due on demand and accrues interest at 8% per annum. As of September 30, 2017, $1,830 in accrued interest was due and was expensed during the three months ended September 30, 2017.

 

4. Other AssetsNote 9 - Subsequent Events

 

On July 31, 2017,December 10, 2018, the Company has entered into an 18 month license agreement through January 31, 2019,a signed commitment with Ace Legends Pte Ltd. (the “Service Company”)PT. Investa Wahana Group, Indonesia to invest $200 million, subscribing for an exclusive, world-wide license to acquire and market the games currently owned and developed by the Service Company. In consideration for receiving the license and for becoming the game publisher for all$100 million in shares of the Service Company’s games indefinitely,Series F Convertible Preferred Stock and an addition $100 million in shares of the Company’s Series G Convertible Preferred Stock. To date, the Company agreedhas not received the subscription proceeds but reasonably expects to payreceive these proceeds or a significant portion thereof during the second quarter of 2019.

The Series F Preferred Stock, which were authorized on January 18, 2019, bearing a dividend of 6% per annum, is convertible into shares of the Company’s Common Stock at an average of $1.80 per share. The Series G Preferred Stock, which were authorized on January 18, 2019, also pays a dividend of 6% per annum and further provides for the Company’s right to force the conversion at $1.80 per share, provided that the KinerjaPay shares are trading at $3.50 per share or higher for a period of 20 days commencing six months after the date of issuance of the Series G Preferred Stock.

KinerjaPay’s use of proceeds are to fund the Company’s peer-to-peer lending operations, potential acquisitions and strategic investments in the Company’s home-based region as part of their expansion plan for 2019. The Company also plans to allocate a certain portion of the subscription proceeds to repurchase KinerjaPay’s stock in the open market, subject to the Service Company $100,000 in four installmentsrules and regulations of $25,000 each. In addition,the SEC.

Subsequent to year end, the Company agreed to issue toconverted approximately $458,000 of principal on their convertible debentures and approximately $22,000 of accrued interest into 3,698,964 shares of common stock.

On April 2, 2019, the Service Company 80,000 restrictedholder converted the remaining 136,000 Series A Convertible Preferred Shares into a total of 850,000 shares of common stock, at an adjusted conversion price of $0.20, which shall be deemed fully paid.adjustment was subject to an agreement between the Company and the institutional investor. As a result of the modification to the conversion price, the Company recognized a loss on conversion in the amount of $428,400.

On April 2, 2019, the Company issued a total of 300,000 restricted shares to a third party for consulting services valued at $186,000 based upon the market price of the shares of $0.60 on the date of issuance.

 

 F-1331 

 

On May 23, 2019, the Company issued 150,000 fully vested common shares to a third party for consulting services in accordance with the terms of a consulting agreement dated April 17, 2019. The shares were valued at $63,000 based upon the market price of the shares of $0.42 on the date of issuance.

On April 1, 2019, the Company executed a 12% fixed convertible promissory note payable to Power Up Lending, LLC in the principal amount of $43,000, and is due on February 15, 2020. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible for 180 days from inception into shares of Common Stock at a conversion price of $1.75 per share, subject to adjustment based upon the terms of the note. After the 180 days the conversion price shall equal the lesser of: (i) $1.75; and (ii) 61% multiplied by the market price, as defined in the agreement. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature does not meet the definition of a derivative during the first 180 days, but will meet the definition of a derivative when the conversion price becomes variable and would at that time require bifurcation and to be accounted for as a derivative liability.

On April 25, 2019, the Company executed an 8% fixed convertible promissory note payable to Tiger Trout Capital, LLC in the principal amount of $110,000, and is due on May 17, 2020. The convertible note had a OID of $10,000, for a purchase price of $100,000. In an event of default as set forth in the note, the interest rate increases to a default amount of 18%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible into shares of Common Stock at 65% of the lowest trading price of the common stock as reported on the National Quotations Bureau OTC market on which the Company’s shares are traded, for the twenty (20) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. The conversion price is adjusted if any 3rd party has the right to convert monies at a discount to market greater than the conversion price in effect at that time then the holder, may utilize such greater discount percentage. Additionally, upon an event of default the conversion rate increases to 55% of the lowest trading price during the 20 days prior to conversion. Per the agreement, the Company is required at all times to have authorized and reserved three times the number of shares that is actually issuable upon full conversion of the note. The Company may redeem the note at amounts ranging from 110% to 150% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature meets the definition of a derivative and requires bifurcation and will be accounted for as a derivative liability.

On May 9, 2019, the Company entered into a 12% convertible promissory note for $282,000, which matures on November 6, 2019. The interest rate increases to a default rate of 24% for events as set forth in the agreement, including if the market capitalization is below $5 million, or there are any dilutive issuances. There is a right of prepayment in the first 180 days, but there is no right to repay after 180 days. Per the agreement, the Company is required at all times to have authorized and reserved three times the number of shares that is actually issuable upon full conversion of the note. There is also a cross default provision to all other notes. In the event of default, the outstanding principal balance increases to 150%, and if the Company fails to maintain the required authorized share reserve, the outstanding principal increases to 200%. Additionally, If the Company enters into a 3(a)(9) or 3(a)(10) issuance of shares there are liquidation damages of 25% of principal, not to be below $15,000. The Company must also obtain the noteholder’s written consent before issuing any new debt. Additionally, if the note is not repaid by the maturity date the principal balance increases by $15,000. In connection with the convertible debenture, the Company issued 313,263 of their common shares as a commitment fee to the noteholder.

The note is convertible into shares of the Company’s common stock at a variable conversion rate that is equal to the lesser of the lowest trading price for the last 20 days prior to the issuance of the note or 45% of the lowest market price over the 20 days prior to conversion. The conversion price shall be adjusted upon subsequent sales of securities at a price lower than the original conversion price. There are additional 12% adjustments to the conversion price for events set forth in the agreement, including if the conversion price is less than $0.01, if the Company is not DTC eligible, the Company is no longer a reporting company, or the note cannot be converted into free trading shares on or after six months from issue date. The holder has the option to increase the principal by $5,000 per each default occurrence instead of applying further discounts to the conversion price. However, under no circumstances shall the principal amount exceed an additional $25,000 nor can the conversion price be less than 30% multiplied by the market price due to the cumulative effect. Per the agreement, the Company is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the note. The conversion feature meets the definition of a derivative and therefore requires bifurcation and will be accounted for as a derivative liability.

On May 17, 2019, the Company executed a 10% fixed convertible promissory note payable to Crossover Capital Fund I, LLC in the principal amount of $82,500, and is due on May 17, 2020. The convertible note had an OID of $7,500, for a purchase price of $75,000. In an event of default as set forth in the note, the interest rate increases to a default amount of 24%. The note is convertible into shares of Common Stock at a conversion price the lower of (i) the fixed price of $1.00 or (ii) 61% of the average of the two (2) lowest trading prices of the Common Stock as reported on the National Quotations Bureau OTC market on which the Company’s shares are traded, for the twenty (20) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. The discount will be increased by 10% if the Company’s common shares are not DTC deliverable. Additionally, if the Company fails to comply with the reporting requirements of the Exchange Act (including but not limited to becoming late or delinquent in its filings, even if the Company subsequently cures such delinquency), the discount shall paybe increased an additional 15%. Per the agreement, the Company is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 120% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature meets the definition of a derivative and requires bifurcation and will be accounted for as a derivative liability.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based upon beliefs of, and information currently available to, the ServiceCompany’s management as well as estimates and assumptions made by the Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions as they relate to the Company royalty fees of 21% of all sales generated underor the license agreement, which payments shall paid on a quarterly basis. PT KinerjaPay Indonesia,Company’s management identify forward-looking statements. Such statements reflect the subsidiarycurrent view of the Company shall also pay a monthly fee of $5,000with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the ServiceCompany’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company duringbelieves that the 18 month termexpectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the license agreement for further business development.United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

The amortization expense for the period ended September 30, 2017 was immaterial to the Company.

5. Going Concern

The accompanyingOur financial statements have beenare prepared in conformityaccordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of America, which contemplate continuation of the Company as a going concern. The Company has not established sufficient revenue to cover its 2017 operating costs,assets and as such, has incurred an operating loss since inception. Further,liabilities as of September 30, 2017, the cash resources of the Company were insufficient to meet its current business plan. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

6. Subsequent Events

There were no material subsequent events following the period ended September 30, 2017 and throughout the date of the filingfinancial statements as well as the reported amounts of Form 10-Q.revenue and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

Unless otherwise indicated or the context requires otherwise, the words “we,” “us,” “our,” the “Company” or “our Company” or “KinerjaPay Corp” refer to KinerjaPay Corp., a Delaware corporation, and its wholly-owned subsidiaries, PT Kinerja Pay Indonesia (“PT Kinerja Pay”) and PT Kinerja Indonesia (“PT Kinerja”). PT Kinerja Simpan Pinjam (“PT Kinerja SP”) is a wholly-owned subsidiary of PT Kinerja. All subsidiaries of the Company are organized under the laws of Indonesia.

Corporate Overview and History

Our business aim is to build a secure and convenient e-commerce ecosystem to customers and merchants through our introduction of services and products including: (i) electronic payment service; and (ii) virtual marketplace both of which are available on the portal, KinerjaPay.com, (the “Portal”). In addition to access to the Portal, our Android and iPhone based mobile application includes additional in-app services to mobile phone users such as social engagement and digital entertainment (the “Mobile App”). A virtual marketplace, powered by our proprietary electronic payment service and gamified with in-app entertainment features, creates a one-stop-shop e-commerce platform for users to BUY, PAY and PLAY. We brand our virtual marketplace under the name of KMALL, our electronic payment solution under the name of KPAY, and our gamification features under the name of KGAMES.

 

 F-1433 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.Back to Table of Contents

As used in this Form 10-Q, references to the “KinerjaPay,” Company,” “we,” “our” or “us” refer to KinerjaPay Corp. Unless the context otherwise indicates.

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which refer to future events. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Plan of Operations

 

The Company was incorporated in Delaware on February 12, 2010 under the name Solarflex Corp. for the purpose of developing, manufacturing and selling a solar photovoltaic element a device(“Equipment”), an equipment that converts light into electrical flow (also known as a photovoltaic cell) based on certain proprietary technology to enable an increase in solar energy conversion efficiency and provide energy at a lower cost. WeThe Company entered into an Asset Purchase Agreement with International Executive Consulting SPRL, organized under the laws of Belgium (“IEC”) on May 14, 2013. The business plan was to use the Equipment to: (i) develop a working prototype of its photovoltaic cell for testing and evaluation; (ii) enter into manufacturing arrangements with third parties to produce the photovoltaic elements and sell to solar panel producers; and (iii) enter into distribution agreements for the commercial sale of our products. Since the Asset Purchase Agreement with IEC through mid-2015, we did not successfully use the Equipment to develop a working prototype, nor was there any estimated timeline for our ability to put the working prototype in production. Since the Company did not generate any revenuesrevenue from the saletechnology, we determined that it was not in the best interest of any solar photovoltaic element, nor did we successfully manufacturerthe Company or construct a working prototype. We determined duringits shareholders to continue devoting resources and incurring expenditures towards efforts to commercialize the 4th quarter of 2015 to evaluate potential business opportunities.technology using the Equipment.

 

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On November 10, 2015, the Company entered into an Asset Purchase Rescission Agreement with IEC (the “Rescission Agreement”) pursuant to which: (i) we transferred and assigned all right, title and interest in the Equipment back to IEC; (ii) IEC returned 333,333 of the 2,000,000 Shares back to the Company; (iii) IEC transferred and assigned the remaining 1,666,667 Shares to Mr. Edwin Witarsa Ng (“Mr. Ng”), a resident of Indonesia, who was appointed as Chairman of our Board of Directors, in consideration for a cash payment by Mr. Ng of $20,000 to IEC. The rationale of the Rescission Agreement was based upon the Registrant’s determination not to pursue the use and commercial exploitation of the Equipment in furtherance of its former solar energy business plan.

 

On December 1, 2015, the Company entered into a license agreement (the “License Agreement”) with PT Kinerja Indonesia, an entity organized under the laws of Indonesia and controlled by Mr. Ng (“PT Kinerja”), for an exclusive, world-wide license to use and commercially exploit certain technology and intellectual property owned by PT Kinerja (the “KinerjaPay IP”) and its website, KinerjaPay.com. KinerjaPay.com (the “Portal”). The Portal, and the technology behind it, KinerjaPay IP, create an e-commerce platform that provides electronic payment solutions to customers and merchants for bill payment, money transfer and online shopping. KinerjaPay.com is among the first portals that allow users to conveniently top up mobile phone credit in Indonesia.

Pursuant to the License Agreement, the Company was granted the exclusive, world-wide rights to the KinerjaPay IP, an e-commerce portal.

The Company purchases data, prepaid mobile plans, and more from a list of vendors that specialize in these transactions. We have a risk of loss as we are buying the plans without the right to return them, therefore we are a principal to the transaction and not an agent. Based upon this, gross revenue treatment appears reasonable for these transactions.

Both PT Kinerja and PT KinerjaPay Indonesia, the Company’s subsidiary created under the laws of Indonesia, are owned and controlled by Mr. Ng, and considered related. All revenue is earned by PT Kinerja, and then transferred to us either gross or net depending on the revenue transaction.

In connection with the License Agreement, we agreed to: (i) change the name of the Company from Solarflex Corp to KinerjaPay Corp.; (ii) implement a reverse split of ourthe Company’s shares of common stock on a one-for-thirty (1:30) basis; and (iii) raise equity capital in the minimum offering amount of $500,000 and the maximum offering amount of $2,500,000 through the offering of units at a price of $0.50, each Unit, each consisting$0.50. Each unit consists of 1 share of common stock (post-reverse) and 1 classClass A warrant exercisable for a period of 24 months to purchase 1 additional share of common stock (post-reverse) at $1.00.$1.00 (“Unit Offering”). The Unit Offering wasis only being made only to “accredited investors” who are not U.S. Persons in reliance uponpursuant to Regulation S promulgated by the SEC under the Securities Act of 1933, as amended (the “Act”“Securities Act”). On January 20, 2016, the Company closed the Minimumits first Unit Offering after it receivedreceiving subscription proceeds in excess of $500,000. To date, the Company has raised $1,540,000 pursuant to subsequent Unit Offerings.

 

As ofOn March 10, 2016, the Company’s name changechanged to KinerjaPay Corp., and its one-for-thirty (1:30) reverse stock split became effective. The Company’s shares

On April 6, 2016, PT Kinerja Pay Indonesia (“PT Kinerja Pay”), a wholly-owned subsidiary of common stock are subject to quotation on the OTCQB marketCompany, was organized under the symbol KPAY.laws of Indonesia, for the purpose of developing and managing the Company’s e-commerce business ranging from electronic payment solutions, virtual marketplace, and any other strategies within the e-commerce ecosystem in Indonesia.

 

Our principal productsOn August 31, 2018, the Company completed the acquisition of its licensor PT Kinerja Indonesia (“PT Kinerja”), which became a wholly-owned subsidiary of the Company. PT Kinerja Indonesia continues to provide the technology solutions needed by the Company to support its e-commerce business and may expand into cloud computing services are (i) our electronic payment service (the “EPS”); and (ii) our virtual marketplace (the “Marketplace”other IT service-related businesses.

On September 13, 2018, PT Kinerja Simpan Pinjam (“PT Kinerja SP”) both, a wholly-owned subsidiary of which are available on our portalPT Kinerja, was organized under the domain name KinerjaPay.com (the “Portal”). Our Android-based mobile app not only serves as an extensionlaws of desktop or laptop access to our website, but has additional in-app services that cater to mobile users, such as social engagementIndonesia for the purpose of developing and digital entertainment (the “Mobile App”). We believe that in combining our EPS functionmanaging a peer-to-peer (“PAY”P2P”) with the ability to buy and sell products via our virtual marketplace (“Buy”) enhanced by a gamification component (“Play”) our customers and merchants increase their loyalty to our services.lending platform focusing on micro-lending activities.

 

Indonesia, the world’s fourth most-populous country, having a population estimated to be 255 million people, is becoming an economic power in the Southeast Asia region. Over 50% of its population is below the age of 30 and we believe that the young Indonesian population is highly adaptive to new technology. The rise of Smartphones and tablets that sell for less than US$100 is rapidly broadening internet access and pushing the Indonesian e-commerce market toward a critical point in terms of scale and profitability, in spite of significant challenges due to poor infrastructure and payment systems. The number of internet users is excepted to double to 125 million by 2018 and Smartphone ownership is to rise from 20 per cent to 52 per cent in the same period, the highest percentage compared to other Southeast Asian countries, according to Redwing, an advisory group.

Notwithstanding our belief that our Portal represents a significant advance as compared to other Indonesian portals, there are a number of potential difficulties that we might face, including the following:

● We may not be able to raise sufficient additional funds to fully implement our business plan and grow our business;

● Competitors may develop alternatives that render our Portal services redundant or unnecessary;

● Our proprietary technology may be shown to have characteristics that may render it insufficient for our business;

● Our Portal may not become widely accepted by consumers and merchants; and

● Strict, new government regulations and inappropriate e-commerce policies, especially in an emerging economy such as Indonesia, may hinder the growth of the e-commerce market.

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We may be expected to require up to an additional $2.5 million in capital during the next 12 months to fully implement our business plan and fund our operations.

Results of Operations during the three months ended September 30, 2017 as compared to the three months ended September 30, 2016

During the three months ended September 30, 2017 and 2016, we generated revenue from services of $1,763,608 and $0, respectively. During the three months ended September 30, 2017, we had costs related to our services revenue of $1,842,985 resulting in a negative gross margin of $79,377. We incurred no costs related to service revenues during the three months ended September 30, 2017.

During the three months ended September 30, 2017, we had general and administrative expenses of $444,732 and depreciation expense of $940 as compared to $363,434 and $17, respectively, during the same period in the prior year . During the three months ended September 30, 2017, we had other costs and expenses related to interest expense of $1,830 as compared to $137 in the same period in the prior year. Our total other costs and expenses were $1,830 during the three months ended September 30, 2017 as compared to $137 in the same period in the prior year.

We had a net loss of $526,879 during the three months ended September 30, 2017 as compared to a net loss $363,588 during the three months ended September 30, 2016.

Results of Operations during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016

During the nine months ended September 30, 2017 and 2016, we generated revenue from services of $1,914,358 and $0, respectively. During the nine months ended September 30, 2017, we had costs related to our services revenue of $2,002,073 resulting in a negative gross margin of $87,715. We incurred no costs related to service revenues during the nine months ended September 30, 2016.

During the nine months ended September 30, 2017, we had general and administrative expenses of $3,993,974 and depreciation expense of $1,896 as compared to $2,444,238 and $103, respectively, during the same period in the prior year . During the nine months ended September 30, 2017, we had other costs and expenses related to interest expense of $1,844 and a loss of $442,697 related to debt conversion as compared to interest expenses of $31 and a loss of $9,003 due to the extinguishment of debt during the nine months ended September 30, 2016. Our total costs and expenses were $444,541 during the nine months ended September 30, 2017 as compared to $9,034 in the same period in the prior year.

We had a net loss of $4,528,126 during the nine months ended September 30, 2017 as compared to a net loss $2,453,375 during the nine months ended September 30, 2016.

Liquidity and Capital Resources

On September 30, 2017, we had $124,409 in current assets represented by cash of $60,488, restricted cash of $29,841, accounts receivable of $22,632 and prepaid expenses of $11,448. On December 31, 2016, we had $77,738 in current assets consisting of $32,591 in cash, $16,181 in restricted cash and $28,966 in prepaid expenses.

We had fixed assets of $13,636 and intangible assets of $25,000 as of September 30, 2017 and fixed assets of $3,845 as of December 31, 2016. We had total assets of of $163,045 as of September 30, 2017 and $81,583 as of December 31, 2016. As of September 30, 2017, we had $57,371 in current liabilities comprised of $2,782 in accounts payable, $51,849 in accounts payable to a related party, tax payable of $907, accrued interest of $1,830 and accrued expense of $3. As of December 31, 2016, we had total current liabilities of $157,663 consisting of accounts payable of $3,461, tax payable of $95, accrued expenses of $4,107 and unissued stock subscriptions of $150,000.

We had no long-term liabilities as of September 30, 2017 and December 31, 2016.

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We used $1,049,360 in our operating activities during the nine months ended September 30, 2017, which was due to a net loss of $4,528,126 offset by total non-cash compensation charges of $3,214,580, a loss on debt conversion of $442,697, $1,896 in depreciation expense, an increase in accounts receivable of $22,632, an increase in other assets of $25,000, a decrease in prepaid expenses of $17,518, a decrease in accounts payable of $148,019 and a decrease in accrued liabilities of $2,274.

We used $902,428 in our operating activities during the nine months ended September 30, 2016, which was due to a net loss of $2,453,375 offset by depreciation expense of $103, a loss on extinguishment of debt of $9,003, non-cash compensation charges of $1,508,133, an increase in accounts payable of $31,230, an increase in accrued liabilities of $7,094 and an increase in prepaid expenses of $4,616.

We financed our negative cash flow from operations during the nine months ended September 30, 2017 through the issuance of common stock of $952,000 and debt borrowings of $150,000. We financed our negative cash flow from operations during the nine-month period ended September 30, 2016 through the issuance of common stock of $804,987 reduced by payments of $8,689 related to principal payments on debt.

We had investing activities of $11,687 during the nine months ended September 30, 2017 related to the purchase of equipment as compared to $2,720 during the same period in the prior year.

Availability of Additional Capital

Notwithstanding our success in raising over $952,000 from the private sale of equity securities during the nine-month period ended September 30, 2017, there can be no assurance that we will continue to be successful in raising additional equity capital to fund our operations. If we determine that it is necessary to raise additional funds, we may choose to do so through public or private equity or debt financing, a bank line of credit, or other arrangements. If we are unable to obtain adequate capital resources to fund operations, we may be required to delay, scale back or eliminate some or all of our plan of operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern.

Any additional equity financing may be dilutive to our stockholders, new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of common stock. Debt or equity financing may subject us to restrictive covenants and significant interest costs.

Capital Expenditure Plan During the Next Twelve Months

During the nine-month period ended September 30, 2017, we raised $952,000 in equity capital and $150,000 through borrowings on debt. We may be expected to require up to an additional $1.6 million in capital during the next 12 months to fully implement our business plan and fund our operations. Our plan is to utilize the equity capital and debt that we raise, together with anticipated cash flow from operations, to fund a very significant investment in sales and marketing, concentration principally on online advertising and incentivizing existing customers for the introduction of new customers, among other strategies. However, there can be no assurance that: (i) we will continue to be successful in raising equity capital in sufficient amounts and/or at terms and conditions satisfactory to the Company; or (ii) we will generate sufficient revenues from operations, to fulfill our plan of operations. Our revenues are expected to come from the sale of our portal services. As a result, we will continue to incur operating losses unless and until we are able to generate sufficient cash flow to meet our operating expenses and fund our planned sales and market efforts. There can be no assurance that the market will adopt our portal or that we will generate sufficient cash flow to fund our enhanced sales and marketing plan. In the event that we are not able to successfully: (i) raise equity capital and/or debt financing; or (ii) market and significantly increase the number of portal users and revenues from such users, our financial condition and results of operations will be materially and adversely affected and we will either have to delay or curtail our plan for funding our sales and marketing efforts.

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Result of Operations

Comparison of the Three Months Ended March 31, 2019 to the Year Ended March 31, 2019

Revenue

During the three months ended March 31, 2019, we generated gross revenues of $94,939. Our cost of sales were $101,219, yielding net revenues of $(6,280), compared to net revenues from a related party of ($11,277) for the three months ended March 31, 2018. The revenues in 2018 were recognized under the license agreement with PT. Kinerja only on a net basis as an agent, which resulted in negative net revenue. Since the acquisition in August of 2018, the revenue is no longer under a license agreement and is recognized on a gross basis as principal.

Expenses

Our expenses for the three months ended March 31, 2019 are summarized as follows in comparison to the three months ended March 31, 2018:

  Three Months Ended March 31, 
  2019  2018 
Marketing Expenses $63,502  $- 
General and administrative  4,750,467   3,305,574 
Depreciation  9,011   1,071 
Other income (expense)  (3,238,770)  (49,313)

Marketing expenses for the three months ended March 31, 2019 increased as there were no marketing expenses for the same period in 2018. This was the result of the Company trying to grow their business on their portal.

General and administrative expenses for the three months ended March 31, 2019 increased by 39% compared to general and administrative expenses for the same period in 2018. The main components of general and administrative expenses in 2019 consisted of approximately $502,000 in consulting fees, approximately $3,560,000 in preferred shares issued to the CEO for a bonus related to raising capital on the expected financing, $165,000 of amortization of the preferred shares issued in the FRS acquisition, and approximately $140,000 in legal and professional fees. The legal and professional fees are primarily fees related to the convertible debentures, both for issuance and opinion letters related to the conversions of the convertible debentures. Included in general and administrative expenses in the three months ending March 31, 2018 was approximately $2,575,000 in shares issued for services.

Other income (expense) mostly increased during the three months ended March 31, 2019 due to the expenses related to the convertible debentures, including changes in fair value of the derivative and warrant liabilities, amortization of the debt discount, financing expenses from the fair value of the derivatives being greater than the face value of the convertible debenture, and penalties and loss on the conversions. None of these transactions occurred during the same period in 2018.

Depreciation expense increased over 741% in the three months ended March 31, 2019 as compared to the same period in 2018, due to the fixed assets associated with the PT Kinerja acquisition.

Working Capital

  March 31, 2019  December 31, 2018 
Current assets $1,980,006  $401,785 
Current liabilities  5,947,706   3,996,097 
Working capital (deficiency) $(3,967,700) $(3,594,312)

Current assets increased by approximately $1,578,000, which was primarily attributable to an increase in Prepaid expenses due to the issuance of common shares for consulting services of approximately $883,000 to be expensed over the one year term of the agreements, less amortization for the period of $336,000, the current portion of the preferred shares issued in the FRS acquisition of approximately $791,000 and $150,000 paid to a third party as a finder’s fee for a future financing. Current liabilities increased by approximately $1,952,000, which was primarily attributable to the following: (i) an increase of approximately $635,000 in the fair value of the derivative liability, which included $1,285,000 in additions to the derivative liability related to new convertible debentures offset by $678,000 of the derivative liability reclassed to equity upon conversion of the related convertible debentures; and (ii) an increase in the fair value of the warrant liability $1,305,000, which included $276,000 from the fair value of newly issued warrants, offset by a decrease in convertible debentures due to conversions of the debentures and the newly issued convertible debentures being fully reduced by debt discounts arising from the bifurcation and classification of their conversion features as derivative liabilities.

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Liquidity and Capital Resources

  Three Months Ended March 31, 
  2019  2018 
    
Net loss $(8,068,030) $(3,367,235)
         
Net cash used in operating activities  (1,053,589)  (663,647)
Net cash used in investing activities  (54,961)  (2,520)
Net cash provided by financing activities  1,063,976   816,000 
(Decrease)/Increase in cash and cash equivalents $(44,574) $149,833 

Net cash used in operating activities increased by approximately 43% for the three months ended March 31, 2019, as compared with the same period in 2018. The increase in cash used was a result of the increase in the net loss of approximately $7,710,000, plus the increase in non-cash activities, including the issuance of preferred stock for services of approximately $3,560,000 and commons shares for approximately $1,038,000, the penalties and loss on conversions and modifications of common and preferred stock of approximately $1,031,000, the financing costs of approximately $473,000, the net decrease in the fair value of the derivative and warrant liabilities of $570,000 and the amortization of debt discount of approximately $997,000. None of these same charges occurred in the three months ended March 31, 2018. Additionally, there was an increase of approximately $932,000 in prepaid and other assets related to shares issued for future services and amounts paid in advance for listing in Malta and a finder’s fee for future expected financing. The cash used in operating activities in 2018 consisted mainly of the net loss of approximately $3,367,000 offset by the non-cash expense of stock -based compensation recognized during the three months.

Net cash used in investing activities for the three months ended March 31, 2019 increased by approximately 2081% as compared to the same period in 2018. The increase was due to the increase of fixed assets used in connection with the inclusion of PT Kinerja since its acquisition.

During the three months ended March 31, 2019, our financing activities mainly consisted of $1,055,000 in proceeds from convertible debentures and$70,000 in cash received in from the sale of share and warrants units, offset by payments made on the promissory note arising from the acquisition of PT Kinerja. Our financing activities during the three months ended March 31, 2018, consisted of $500,000 for the sale of preferred stock, $100,000 from the exercise of warrants and $216,000 proceeds on debt.

Convertible Note Agreements

On January 2, 2019, the Company executed an 12% convertible promissory note payable to Power Up Lending, LLC in the principal amount of $43,000, which is due on October 30, 2019. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible during first 180 days after issuance at a fixed conversion price of $1.75. After the initial conversion period, the conversion price shall equal the lesser of: (i) the fixed price; and (ii) 61% multiplied by the market price (as defined in the note). Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature does not meet the definition of a derivative during the first 180 days but will meet the definition of a derivative when the conversion price becomes variable and would at that time require bifurcation and to be accounted for as a derivative liability.

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On January 18, 2019, the Company entered into a convertible note with Tangiers Global, LLC for the principal amount of $165,000, with an OID of $15,000, convertible into shares of common stock of the Company, which matures on January 18, 2020. The note bears interest at 10%, which increases to 20% upon an event of default. In an event of default as set forth in the note, the outstanding principal balance increases by 40%.. The note is convertible at 65% multiplied by the lowest closing price during the 15 days prior to the conversion. The discount increases by 5% discount if there is a DTC “chill” in effect., and an additional 5% if the Company is not DWAC eligible. Per the agreement, the Company is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 120% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time ranging from the date of issuance of the debenture.

On January 25, 2019, the Company entered into a convertible note with Armada Investment Fund LLC for the principal amount of $38,500 for a purchase price of $35,000, convertible into shares of common stock of the Company, which matures on October 25, 2019. The note bears interest at 8%, which increases to 24% upon an event of default. In an event of default as set forth in the note, the default sum becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible at 65% multiplied by the lowest closing price during the 20 days prior to the conversion. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time ranging from the date of issuance of the debenture. In connection with the note, the Company issued 115,500 warrants, exercisable at $0.49, with a five year term.

On January 25, 2019, the Company entered into a convertible note with Jefferson Street Capital LLC for the principal amount of $38,500 for a purchase price of $35,000, convertible into shares of common stock of the Company, which matures on October 25, 2019. The note bears interest at 8%, which increases to 24% upon an event of default. In an event of default as set forth in the note, the default sum becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible at 65% multiplied by the lowest closing price during the 20 days prior to the conversion. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time ranging from the date of issuance of the debenture. In connection with the note, the Company issued 115,500 warrants, exercisable at $0.49, with a five year term.

On January 25, 2019, the Company entered into a convertible note with BHP Capital NY, Inc. for the principal amount of $38,500 for a purchase price of $35,000, convertible into shares of common stock of the Company, which matures on October 25, 2019. The note bears interest at 8%, which increases to 24% upon an event of default. In an event of default as set forth in the note, the default sum becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible at 65% multiplied by the lowest closing price during the 20 days prior to the conversion. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time ranging from the date of issuance of the debenture. In connection with the note, the Company issued 115,500 warrants, exercisable at $0.49, with a five year term.

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On January 28, 2019, the Company executed an 12% convertible promissory note payable to Power Up Lending, LLC in the principal amount of $48,000, which is due on November 30, 2019. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible during first 180 days after issuance at a fixed conversion price of $1.75. After the initial conversion period, the conversion price shall equal the lesser of: (i) the fixed price; and (ii) 61% multiplied by the market price (as defined in the note). Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture.

On February 28, 2019, the Company executed an 10% fixed convertible promissory note payable to Crossover Capital Fund I, LLC in the principal amount of $115,000 with a $10,000 OID, which is due on November 28, 2019. In the case of a sale event, as defined in the agreement, the principal amount of the note increases to 150%. The note is convertible into shares of Common Stock at a conversion price of the lower of (i) $1.00 per share or (ii) 65% of the lowest trading price for the 20 prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. The discount increases 10% if there is a DTC “chill” in effect. The conversion price shall be adjusted upon subsequent sales of securities at a price lower than the original conversion price. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 125% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. Per the agreement, the Company is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the note.

On March 4, 2019, the Company executed an 8% fixed convertible promissory note payable to Morningview Financial, LLC in the principal amount of $55,000 with a $5,000 OID, for a purchase price of $50,000, which is due on March 5, 2020. In the case of a sale event, as defined in the agreement, the principal amount of the note increases to 150%. The note is convertible into shares of Common Stock at a conversion price of 65% of the market price, as defined in the note. The discount increases 15% if there is an event of default, and 10% if the shares are not deliverable via DWAC. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. Per the agreement, the Company is required at all times to have authorized and reserved eight times the number of shares that is actually issuable upon full conversion of the note.

On March 5, 2019, the Company executed an 12% convertible promissory note payable to Power Up Lending, LLC in the principal amount of $53,000, which is due on January 15, 2020. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible during first 180 days after issuance at a fixed conversion price of $1.75. After the initial conversion period, the conversion price shall equal the lesser of: (i) the fixed price; and (ii) 61% multiplied by the market price (as defined in the note). Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture. The conversion feature does not meet the definition of a derivative during the first 180 days but will meet the definition of a derivative when the conversion price becomes variable and would at that time require bifurcation and to be accounted for as a derivative liability.

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On March 14, 2019, the Company entered into a 12% convertible note for the principal amount of $118,000 with JSJ Investments, Inc, which matures on March 14, 2020, and has a $5,000 OID. The holder will also deduct $13,000 from the purchase price for legal and due diligence fees. The note is convertible commencing 180 days after issuance of the note (or upon an event of Default), with a variable conversion rate at 60% of market price (as defined in the note). The conversion rate adjusts if there are common stock equivalents issued and in which the aggregate per share price is below the original conversion price, in which case the adjusted conversion price is the lower of the original conversion price or 25% of the aggregate price. The discount increases to a 55% discount if there is a DTC “chill” in effect and an additional 5% if the Company is not DWAC or DTC eligible, as well as an additional 5% discount for each event of default. The debenture also includes various liquidated damages for various events, as set forth in the agreement, such as the Company’s inability or delay in the timely issuance of the shares upon receipt of a conversion request. In an event of default, as defined in the note, the “default amount” shall be calculated at the product of (A) the then outstanding principal amount of the note, plus accrued interest, divided by (B) the conversion price as determined on the issuance date, multiplied by (C)the highest price at which the common stock traded at any time between the issuance date and the date of the event of default .Per the agreement, the Company is required at all times to have authorized and reserved eight times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 135% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture, and at 150% after 180 days.

On March 25, 2019, the Company executed an 8% convertible promissory note payable to Belridge Capital L.P. in the principal amount of $137,500, for a purchase price of $125,000, which is due on March 24, 2020. In an event of default as set forth in the note, the interest rate increases to a default amount of 18%, and the default sum due becomes 130% of the principal outstanding and accrued interest (the “default redemption amount”). Alternatively, at the election of the holder, the Holder may require the Company to redeem all or part of the default redemption amount through the issuance of such number of shares of common stock equal to (x) the default redemption amount, divided by (y) or 55% of the lowest traded price in the 20 trading days prior to the conversion date. The note is convertible into shares of common stock at a conversion price of the lower of (i) $1.00 per share or (ii) 61% of the lowest trading price for the 20 prior trading days prior to the conversion date. Per the agreement, the Company is required at all times to have authorized and reserved three times the number of shares that is actually issuable upon full conversion of the note. The Company may redeem the note at any time the note is outstanding and there is not an event of default, at amounts ranging in the first 90 days from the date of issuance from 115% to 135% of the principal and accrued interest balance, based on the redemption date’s passage of time. The note also includes a “most favored nation” clause, whereby when the Company enters into any future financing transactions with a third-party investor, the Company must provide the holder notification of the terms of the new financing transaction, and if the holder determines that the terms of the subsequent investment are preferable to the original terms of the March 25, 2019 convertible promissory note, the original terms of the note will be amended and restated, which may include the conversion terms.

On April 1, 2019, the Company executed a 12% fixed convertible promissory note payable to Power Up Lending, LLC in the principal amount of $43,000, and is due on February 15, 2020. In an event of default as set forth in the note, the interest rate increases to a default amount of 22%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible for 180 days from inception into shares of Common Stock at a conversion price of $1.75 per share, subject to adjustment based upon the terms of the note. After the 180 days the conversion price shall equal the lesser of: (i) $1.75; and (ii) 61% multiplied by the market price, as defined in the agreement. Per the agreement, the Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 115% to 140% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture.

On April 25, 2019, the Company executed an 8% fixed convertible promissory note payable to Tiger Trout Capital, LLC in the principal amount of $110,000, and is due on May 17, 2020. The convertible note had a OID of $10,000, for a purchase price of $100,000. In an event of default as set forth in the note, the interest rate increases to a default amount of 18%, and the default sum due becomes 150% of the principal outstanding and accrued interest, and if the Company cannot deliver conversion shares or fails to reserve sufficient authorized shares, then the default sum increases to 200%. The note is convertible into shares of Common Stock at 65% of the lowest trading price of the common stock as reported on the National Quotations Bureau OTC market on which the Company’s shares are traded, for the twenty (20) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. The conversion price is adjusted if any 3rd party has the right to convert monies at a discount to market greater than the conversion price in effect at that time then the holder, may utilize such greater discount percentage. Additionally, upon an event of default the conversion rate increases to 55% of the lowest trading price during the 20 days prior to conversion. Per the agreement, the Company is required at all times to have authorized and reserved three times the number of shares that is actually issuable upon full conversion of the note. The Company may redeem the note at amounts ranging from 110% to 150% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture.

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On May 9, 2019, the Company entered into a 12% convertible promissory note for $282,000, which matures on November 6, 2019. The interest rate increases to a default rate of 24% for events as set forth in the agreement, including if the market capitalization is below $5 million, or there are any dilutive issuances. There is a right of prepayment in the first 180 days, but there is no right to repay after 180 days. Per the agreement, the Company is required at all times to have authorized and reserved three times the number of shares that is actually issuable upon full conversion of the note. There is also a cross default provision to all other notes. In the event of default, the outstanding principal balance increases to 150%, and if the Company fails to maintain the required authorized share reserve, the outstanding principal increases to 200%. Additionally, If the Company enters into a 3(a)(9) or 3(a)(10) issuance of shares there are liquidation damages of 25% of principal, not to be below $15,000. The Company must also obtain the noteholder’s written consent before issuing any new debt. Additionally, if the note is not repaid by the maturity date the principal balance increases by $15,000.

The note is convertible into shares of the Company’s common stock at a variable conversion rate that is equal to the lesser of the lowest trading price for the last 20 days prior to the issuance of the note or 45% of the lowest market price over the 20 days prior to conversion. The conversion price shall be adjusted upon subsequent sales of securities at a price lower than the original conversion price. There are additional 12% adjustments to the conversion price for events set forth in the agreement, including if the conversion price is less than $0.01, if the Company is not DTC eligible, the Company is no longer a reporting company, or the note cannot be converted into free trading shares on or after six months from issue date. The holder has the option to increase the principal by $5,000 per each default occurrence instead of applying further discounts to the conversion price. However, under no circumstances shall the principal amount exceed an additional $25,000 nor can the conversion price be less than 30% multiplied by the market price due to the cumulative effect. Per the agreement, the Company is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the note.

On May 17, 2019, the Company executed a 10% fixed convertible promissory note payable to Crossover Capital Fund I, LLC in the principal amount of $82,500, and is due on May 17, 2020. The convertible note had an OID of $7,500, for a purchase price of $75,000. In an event of default as set forth in the note, the interest rate increases to a default amount of 24%. The note is convertible into shares of Common Stock at a conversion price the lower of (i) the fixed price of $1.00 or (ii) 61% of the average of the two (2) lowest trading prices of the Common Stock as reported on the National Quotations Bureau OTC market on which the Company’s shares are traded, for the twenty (20) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. The discount will be increased by 10% if the Company’s common shares are not DTC deliverable. Additionally, if the Company fails to comply with the reporting requirements of the Exchange Act (including but not limited to becoming late or delinquent in its filings, even if the Company subsequently cures such delinquency), the discount shall be increased an additional 15%. Per the agreement, the Company is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the note. During the first 180 days the convertible redeemable note is in effect, the Company may redeem the note at amounts ranging from 120% to 145% of the principal and accrued interest balance, based on the redemption date’s passage of time from the date of issuance of the debenture.

Going Concern Consideration

The accompanying audited consolidated financial statements contained in this periodic report on Form 10-Q 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 Company has not established sufficient revenue to cover its operating costs, and as such, has incurred an operating loss since inception. For the three months ended March 31, 2019, the Company had a net loss of approximately $8,068,000. At March 31, 2019, the Company had an accumulated deficit of approximately $26,213,000 and a working capital deficit of approximately $3,968,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern, within one year from the issuance date of this filing. The Company’s ability to continue as a going concern is dependent on its ability to raise the required additional capital or debt financing to meet short and long-term operating requirements. During the three months ended March 31, 2018, the Company received net cash proceeds of approximately $935,000 from the issuance of new convertible debentures. Subsequent to March 31, 2019, the Company received approximately $500,000 in net cash proceeds from the issuance of new convertible debentures. 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, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict our operations. The Company continues to pursue external financing alternatives to improve its working capital position. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

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Future Financing

We will require additional funds to implement our growth strategy for our business. Subsequent to quarter end, we have raised approximately an additional $920,000, net of OID, from convertible debentures. Additionally, on December 10, 2018, we entered into a signed commitment with PT. Investa Wahana Group, Indonesia to invest $200 million, subscribing for $100 million in shares of the Company’s Series F Convertible Preferred Stock and an addition $100 million in shares of the Company’s Series G Convertible Preferred Stock. To date, we have not received the subscription proceeds, but we reasonably expect to receive these proceeds or a significant portion thereof during the second quarter of 2019.

However, not including funds needed for capital expenditures or to pay down existing debt and trade payables, we anticipate that we will need to raise an additional $3,000,000 to cover all of our operational expenses over the next 12 months. These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares. There can be no assurance that additional financing will be available to us when needed or, if available, that such financing can be obtained on commercially reasonable terms. If we are not able to obtain the additional necessary financing on a timely basis, or if we are unable to generate significant revenues from operations, we will not be able to meet our other obligations as they become due, and we will be forced to scale down or perhaps even cease our operations.

Critical Accounting Policies and Estimates

 

Our registered independent auditorssignificant accounting policies are more fully described in the notes to our financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 as filed with the SEC on April 24, 2019. We believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations.

Fair Value Measurement

The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques 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 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used in measuring fair value are:

●Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
●Level 2: Inputs to the valuation methodology include:
-Quoted prices for similar assets or liabilities in active markets;
-Quoted prices for identical or similar assets or liabilities in inactive markets;
-Inputs other than quoted prices that are observable for the asset or liability;
-Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

●Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

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The assets or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company did not have any Level 1 or Level 2 assets and liabilities at December 31, 2018. The Derivative and warrant liabilities at December 31, 2018, are Level 3 fair value measurements. The Company did not have any Level 1, Level 2 or Level 3 financial assets and liabilities as of and for the year ended December 31, 2017.

Revenue Recognition

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the year ended December 31, 2018.

Income Taxes

Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

In addition, our management performs an evaluation of all uncertain income tax positions taken or expected to be taken in the course of preparing our income tax returns to determine whether the income tax positions meet a “more likely than not” standard of being sustained under examination by the applicable taxing authorities. This evaluation is required to be performed for all open tax years, as defined by the various statutes of limitations, for federal and state purposes.

Accounting For Obligations And Instruments Potentially To Be Settled In The Company’s Own Stock:

We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with FASB ASC 815,Accounting for Derivative Financial Instruments.This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock.

Embedded derivatives are separated from the host contract and carried at fair value when (1) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate, standalone instrument with the same terms would qualify as a derivative instrument. The derivative is measured both initially and in subsequent periods at fair value, with changes in fair value recognized on the Statement of Operations.

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which supersedes the existing guidance for lease accounting, “Leases (Topic 840)”. ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an opinionoption to elect to use certain transition relief. We expect to apply the ASU without adjusting the comparative periods and, if applicable, recognizing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. We adopted ASC 842 on January 1, 2019, and the adoption did not have an impact on our consolidated financial statements.

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In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” that expands the scope of ASC Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of ASC Topic 718 to nonemployee awards except for certain exemptions specified in the amendment. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. We do not expect the implementation of this new pronouncement to have a material impact on our consolidated financial statements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial statements which includes a statement describing our going concern status. This meanscondition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capitalmaterial to pay our bills and meet our other financial obligations. This is because we have not generated any revenues and no revenues are anticipated until we begin marketing the product. Accordingly, we must raise capital from sources other than the actual sale of the product. We must raise capital to implement our project and stay in business.stockholders.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSUREDISCLOSURES ABOUT MARKET RISK.Back to Table of ContentsRISK

 

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES.Back to Table of ContentsPROCEDURES

 

Evaluation of disclosure controlsDisclosure Controls and procedures.Procedures

 

As of September 30, 2017, the Company’s chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company’sWe maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) orand 15d-15(e) under the Securities Exchange Act. BasedAct of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the evaluationlikelihood of thesefuture events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as provided under the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013),end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our chiefprincipal executive officer and chiefprincipal financial officer concluded that, our disclosure controls and procedures were ineffective as September 30, 2017. Management has identified corrective actionsnot effective due to address the weaknesses and plans to implement them during the fourth quarter of 2017.material weakness(es) in internal control over financial reporting described below.

 

ChangesMaterial Weakness in Internal Control Overover Financial Reporting

 

There were no changes inManagement conducted an assessment of the Company’seffectiveness of the Registrant’s internal control over financial reporting duringas of March 31, 2019 based on the period coveredframework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this report, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 underassessment, management has determined that the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’sRegistrant’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.Back to Tablereporting as of Contents

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property isMarch 31, 2019 was not the subject of any pending legal proceedings.

ITEM 1A. RISK FACTORS.Back to Table of Contentseffective.

 

A smaller reporting company,material weakness, as defined in the standards established by Item 10the Sarbanes-Oxley Act of Regulation S-K,2002 (the “Sarbanes-Oxley Act”), is not required to provide the information required by this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES UND USE OF PROCEEDS.Back to Tablea deficiency, or a combination of Contents

In July 2016, we issued 100,000 sharesdeficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our common stock to an unrelated party as payment forannual or interim financial statements will not be prevented or detected on a service agreement. The shares were valued at the closing price as of the date of the agreement ($0.77) and offset by $1,000 in cash received for the shares. This resulted in full recognition of the excess of fair value over cash received of $76,000 as consulting services expense.timely basis.

 

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Share based payment transactions were accounted for in accordance with the requirements of ASC 505-50 Equity Based Payments to Non Employees. Paragraph 505-50-30-6 establishes that share-based payment transactions with non-employees shall be measured at the fair valueThe ineffectiveness of the consideration received orCompany’s internal control over financial reporting was due to the fair valuefollowing material weaknesses which are indicative of many small companies with small number of staff:

●inadequate segregation of duties consistent with control objectives;
●lack of independent Board of Directors and absence of Audit Committee to exercise oversight responsibility related to financial reporting and internal control;
●lack of documentation on policies and procedures that are critical to the accomplishment of financial reporting objectives; and
●no formal written policy for the approval, identification and authorization of related party transactions currently exists.

Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the equity instruments issued, whichever is more reliably measurable.material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The Company measured share-based payment transactions at the fair value of the shares issued at date of grant, the Company believes that the value of the shares is more reliably measurable.remediation actions planned include:

●continue to obtain sufficient resources to achieve adequate segregation of duties;
●identify gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company; and
●continue to develop policies and procedures on internal control over financial reporting and monitor the effectiveness of operations on existing controls and procedures.

 

During the three monthsfiscal quarter ended September 30, 2017,March 31, 2019, we continued to execute upon our planned remediation actions which are all intended to strengthen our overall control environment and improve policies and procedures over internal control. In the light of business acquisition of PT Kinerja and launch of a new subsidiary PT Kinerja SP in 2018, we continued to work with key personnel in charge of financial reporting of the Company authorized the issuance of 181,818 shares of common stock valued at $1.10 per share. As of September 30, 2017 none of these shares have been issued and outstanding even though the Company received $50,000 with respectsubsidiaries to these shares. As a result, the Company recorded $50,000 in stock payable as of September 30, 2017.

During the three months ended September 30, 2017, the Company authorized the issuance of 80,000 shares of common stock valued at $1.60 per share to Ace Legends Pte Ltd. for services provided. As of September 30, 2017 none of these shares have been issuedstreamline daily accounting processes, and outstanding. As a result, the Company recorded $128,000 in stock payable as of September 30, 2017

The Company believes that the issuances and sale of the restricted shares were exempt from registration pursuant to Section 4(2) of the Act as privately negotiated, isolated, non-recurring transactions not involving any public solicitation. The recipients in each case represented their intention to acquire the securities for investment only and not with a view to the distribution thereof. Appropriate restrictive legends are affixed to the stock certificates issued in such transactions. All recipients of restricted shares either received adequate information about the Company or had access, through employment, relation and/orconform all business relationshipsunits with the Companysame set of financial reporting procedures. Our management will continue to such information.monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

 

ITEM 3. DEFAULT UPON SENIOR SECURITIES.Back to Table of ContentsChanges in Internal Control over Financial Reporting

 

None.There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended March 31, 2019 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 4. MINE SAFETY DISCLOSURE.Back to Table of ContentsPART II – OTHER INFORMATION

 

None.

ITEM 5. OTHER INFORMATION.Back to Table of Contents1. LEGAL PROCEEDINGS

 

None.We are not involved in any pending legal proceedings that we anticipate would result in a material adverse effect on our business or operations.

 

ITEM 6. EXHIBITS.Back to Table of Contents1A. RISK FACTORS

 

Exhibit No.Description
31.1Certification of CEO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2Certification of CFO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

An investment in our common stock involves a number of very significant risks. You should carefully consider the risk factors included in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “Annual Report”), as filed with the SEC on April 24, 2019, in addition to other information contained in those documents and reports that we have filed with the SEC pursuant to the Securities Act and the Exchange Act since the date of the filing of the Annual Report, including, without limitation, this Quarterly Report on Form 10-Q, in evaluating our company and its business before purchasing shares of our common stock. Our business, operating results and financial condition could be adversely affected due to any of those risks.

 

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

The following paragraphs set forth certain information with respect to all securities sold by the Company during the three months ended March 31, 2019 without registration under the Securities Act:

Reference is made to the disclosure under Note 5 of the accompanying financial statements with respect to the issuance of warrants in connection with the issuance of convertible notes during the three-month period ended March 31, 2019, as follows:

(i) In connection with the Armada note dated January 25, 2019, the Company issued 115,500 warrants, exercisable at $0.49, with a five-year term;

(ii) In connection with the Jefferson note dated January 25, 2019, the Company issued 115,500 warrants, exercisable at $0.49, with a five-year term; and

(iii) In connection with the BHP note dated January 25, 2019, the Company issued 115,500 warrants, exercisable at $0.49, with a five-year term.

The above issuances of warrants did not involve any underwriters, underwriting discounts or commissions, or any public offering. The warrants were issued to accredited investors, and the Company relied upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Act”) by virtue of Section 4(2) thereof and/or Regulation D promulgated by the SEC under the Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

item 4. mine safety disclosures

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

EXHIBIT INDEX

Incorporated by Reference
Exhibit NumberExhibit DescriptionFormExhibitFiling Date/Period End Date
21.1**Subsidiaries of the Registrant
31.1**Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.
31.2**Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer.
32.1**Section 1350 Certification of Chief Executive Officer.
32.2**Section 1350 Certification of Chief Financial Officer.
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.INS*XBRL Instance Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
101.SCH*XBRL Taxonomy Extension Schema Document
* Filed herewith.
** Furnished herewith.

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SIGNATURES

 

In accordance with Section 13 or 15(d)Pursuant to the requirements 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.

 

SignatureBy:TitleDate
/s/ Edwin Witarsa Ng 
Edwin Witarsa Ng
Chief Executive Officer and Director (Principal Executive Officer) December 8, 2017
Edwin Witarsa NgDate: June 5, 2019 

By:/s/ Windy Johan 
 Windy Johan 
/s/ Meigisonnata Widjaja Chief Financial Officer (Principal Financial Officer and PrincipalDecember 8, 2017
Meigisonnata WidjajaAccounting Officer) 
Date: June 5, 2019 

 

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