UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
| [X] | QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2018 |
| | |
| | OR |
| | |
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 000-30675
EnXnet, Inc.
(Name of issuer in its charter)
| Oklahoma | 73-1561191 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
7450 S Winston Ave - Tulsa, Ok 74136
(Address of principal executive offices & zip code)
(918) 494 - 6663
Registrant’s telephone number, including area code:
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 last 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES [ ] NO [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| | Large Accelerated Filer | [ ] | | Accelerated Filer | [ ] |
| | Non-accelerated Filer | [ ] | | Smaller Reporting Company | [X] |
| | (Do not check if smaller reporting company) | | | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES [ ] NO [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 14, 2018, there were outstanding 58,376,518 shares of the registrant’s common stock, $0.00005 par value.
| | Table of Contents | |
| | | Page |
Item 1. | PART I. FINANCIAL INFORMATION Financial Statements | |
| | Consolidated Balance Sheets as of September 30, 2018 and March 31, 2018 (unaudited) | 3 |
| | Consolidated Statements of Operations for the Three and Six months ended September 30, 2018 and 2017 (unaudited) | 4 |
| | Consolidated Statements of Cash Flows for the Six months ended September 30, 2018 and 2017 (unaudited) | 5 |
| | Notes to Consolidated Financial Statements (unaudited) | 6 |
| | | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 14 |
| Item 4. | Controls and Procedures | 14 |
| | | |
PARTII. OTHER INFORMATION
| Item 1. | Legal Proceedings | 14 |
| Item 1A. | Risk Factors | 14 |
| Item 6. | Exhibits and Reports on Form 8-K | 15 |
| | | |
| Signatures | | 16 |
| | | |
| Exhibit Index | | 17 |
PART I. FINANCIAL INFORMATION
| ITEM 1. | FINANCIALSTATEMENTS. |
ENXNET, INC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | September 30, 2018 | | March 31, 2018 |
| ASSETS | | | | | | | | |
| CURRENT ASSETS | | | | | | | | |
| Cash | | $ | 8,922 | | | $ | 21,744 | |
| Restricted cash | | | 2,313 | | | | 19,620 | |
| Prepaid expenses | | | — | | | | 1,118 | |
| TOTAL CURRENT ASSETS | | | 11,235 | | | | 42,482 | |
| OTHER ASSETS | | | | | | | | |
| Oil and gas cash bond | | | 100,000 | | | | 100,000 | |
| | | | | | | | | |
| TOTAL OTHER ASSETS | | | 100,000 | | | | 100,000 | |
| TOTAL ASSETS | | $ | 111,235 | | | $ | 142,482 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 694,281 | | | $ | 674,297 | |
| Advances from officer - related party | | | 10,500 | | | | 25,500 | |
| Advances from stockholder | | | 31,000 | | | | 31,000 | |
| Note payable-stockholder | | | — | | | | 100,000 | |
| Note payable-related party | | | — | | | | — | |
| Convertible notes payable | | | 400,000 | | | | 300,000 | |
| Convertible notes payable - related party | | | 935,101 | | | | 920,101 | |
| TOTAL CURRENT LIABILITIES | | | 2,070,882 | | | | 2,050,898 | |
| LONG-TERM LIABILITIES | | | | | | | | |
| Convertible note payable | | | — | | | | 100,000 | |
| TOTAL LONG-TERM LIABILITIES | | | — | | | | 100,000 | |
| TOTAL LIABILITIES | | | 2,070,882 | | | | 2,150,898 | |
| STOCKHOLDERS’ DEFICIT | | | | | | | | |
| Common stock, $0.00005 par value; 200,000,000 shares authorized, 58,376,518 and 55,276,518 shares issued and outstanding, respectively | | | 2,919 | | | | 2,764 | |
| Additional paid-in capital | | | 5,838,671 | | | | 5,689,654 | |
| Accumulated deficit | | | (7,701,237 | ) | | | (7,600,834 | ) |
| Other comprehensive loss | | | (100,000 | ) | | | (100,000 | ) |
| TOTAL STOCKHOLDERS’ DEFICIT | | | (1,959,647 | ) | | | (2,008,416 | ) |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | $ | 111,235 | | | $ | 142,482 | |
| | | | | | | | | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
ENXNET, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | For the Three Months Ended September 30, | | For the Six Months Ended September 30, |
| EXPENSES | | | 2018 | | | | 2017 | | | | 2018 | | | | 2017 | |
| Oil and gas exploration | | $ | — | | | $ | — | | | $ | — | | | $ | 600 | |
| Impairment of oil and gas properties, unproven | | | 15,366 | | | | — | | | | 32,494 | | | | — | |
| Consulting | | | 1,672 | | | | 12,196 | | | | 1,672 | | | | 12,196 | |
| Payroll | | | 1,500 | | | | 18,998 | | | | 3,000 | | | | 20,498 | |
| Professional services | | | 5,827 | | | | 14,187 | | | | 20,934 | | | | 20,210 | |
| Occupancy and offices | | | 1,578 | | | | 1,235 | | | | 3,466 | | | | 3,089 | |
| Travel | | | 295 | | | | 367 | | | | 520 | | | | 617 | |
| Total Expenses | | | 26,238 | | | | 46,983 | | | | 62,086 | | | | 57,210 | |
| LOSS FROM OPERATIONS | | | (26,238 | ) | | | (46,983 | ) | | | (62,086 | ) | | | (57,210 | ) |
| OTHER EXPENSE | | | | | | | | | | | | | | | | |
| Loss on conversion of notes payable | | | (17,500 | ) | | | — | | | | (17,500 | ) | | | — | |
| Interest expense | | | (9,934 | ) | | | (15,056 | ) | | | (20,817 | ) | | | (28,425 | ) |
| Total Other Expenses | | $ | (27,434 | ) | | $ | (15,056 | ) | | $ | (38,317 | ) | | $ | (28,425 | ) |
| NET LOSS | | $ | (53,672 | ) | | $ | (62,039 | ) | | $ | (100,403 | ) | | $ | (85,635 | ) |
| BASIC AND DILUTED NET LOSS PER SHARE | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.00 | ) |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED | | | 57,096,298 | | | | 54,899,595 | | | | 56,181,436 | | | | 54,668,139 | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
ENXNET, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | For the Six Months Ended September 30, |
| | | 2018 | | 2017 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | |
| Net loss | | $ | (100,403 | ) | | $ | (85,635 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
| Common stock issued for additional interest | | | — | | | | 8,300 | |
| Common stock issued for compensation | | | — | | | | 7,650 | |
| Stock options extended | | | 1,672 | | | | 22,044 | |
| Impairment of oil and gas properties, unproved | | | 32,494 | | | | — | |
| Loss on conversion of notes payable | | | 17,500 | | | | — | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Prepaid expenses | | | 1,118 | | | | — | |
| Accounts payable & accrued expenses | | | 19,984 | | | | 17,414 | |
| Net cash used in operating activities | | | (27,635 | ) | | | (30,227 | ) |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | |
| Additions to oil and gas properties, unproved | | | (32,494 | ) | | | (32,821 | ) |
| Purchase of cash bond | | | — | | | | (100,000 | ) |
| Net cash used in investing activities | | | (32,494 | ) | | | (132,821 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from advances from officer-related party | | | — | | | | 500 | |
| Payment of advances from officer-related party | | | — | | | | (500 | ) |
| Proceeds from convertible note payable-stockholder | | | — | | | | 50,000 | |
| Proceeds from convertible notes payable – related parties | | | — | | | | 16,000 | |
| Proceeds from note payable-stockholder | | | — | | | | 100,000 | |
| Proceeds from sales of stock | | | 30,000 | | | | — | |
| Net cash provided by financing activities | | | 30,000 | | | | 166,000 | |
| NET CHANGE IN CASH AND RESTRICTED CASH | | | (30,129 | ) | | | 2,952 | |
| CASH AND RESTRICTED CASH - Beginning of period | | | 41,364 | | | | 60,400 | |
| CASH AND RESTRICTED CASH - End of period | | $ | 11,235 | | | $ | 63,352 | |
| SUPPLEMENTAL CASH FLOW DISCLOSURES: | | | | | | | | |
| Cash paid for interest | | $ | — | | | $ | 2,750 | |
| Cash paid for taxes | | $ | — | | | $ | — | |
| NON-CASH FINANCING AND INVESTING TRANSACTIONS: | | | | | | | | |
| Conversion of advances from officer-related party to convertible notes payable-related party | | $ | 15,000 | | | $ | 6,000 | |
| Conversion of notes payable stockholder with stock issuance | | $ | 100,000 | | | $ | — | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
ENXNET, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of EnXnet, Inc. (“EnXnet” or “the Company”) for the six months ended September 30, 2018 have been prepared in accordance with generally accepted accounting principles in the United States of America, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim financial information. Accordingly, the financial statements do not include all information and footnotes required by generally accepted accounting principles in the United States for complete annual financial statements. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s March 31, 2018 Annual Report on Form 10-K.
Reclassification
Certain amounts in the 2017 financial statements have been reclassified to conform to the 2018 financial presentation. These reclassifications have no impact on net loss.
Cash and Restricted Cash
Cash and restricted cash consist of the following: | | | | |
| | | September 30, 2018 | | March 31, 2018 |
| Cash | | | 8,922 | | | | 21,744 | |
| Restricted cash | | | 2,313 | | | | 19,620 | |
| Total cash and restricted cash | | $ | 11,235 | | | $ | 41,364 | |
| | | | | | | | |
Recent Accounting Pronouncements
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for all interim and annual reporting periods beginning after December 15, 2017. The attached financial statements include the adoption of ASU 2016-18 which was adopted by the Company on April 1, 2018. The adoption did not have a material impact on the Company’s Consolidated Financial Statements “, other than certain reclassifications have been made in the Company’s consolidated statements of cash flows to conform with the current period presentation.
The Company does not expect the adoption of other recently issued accounting pronouncements to have a significant impact on the Company's results of operation, financial position or cash flows.
NOTE 2 – GOING CONCERN
The Company has a working capital deficit and has incurred losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.
Management of the Company has undertaken certain actions to address these conditions. Funds required to carry out management’s plans are expected to be derived from future stock sales and borrowings from outside parties. There can be no assurances that the Company will be successful in executing its plans.
NOTE 3 – NOTES PAYABLE
| Note payable-stockholder consists of the following: | |
| | | September 30, 2018 | | March 31, 2018 |
| 5.75% note payable to a stockholder, due May 31, 2018. | | $ | — | | | $ | 100,000 | |
| Convertible notes payable-related party consists of the following: | |
| | September 30, 2018 | | March 31, 2018 |
| 2% convertible notes payable to Ryan Corley, President of the Company, due on demand, convertible into a maximum of 38,238,984 common shares | 764,455 | | 749,455 |
| 2% convertible note payable to an entity controlled by Ryan Corley, President of the Company, due on demand, convertible into a maximum of 978,000 common shares | 48,900 | | 48,900 |
| 3% convertible notes payable to an entity controlled by Ryan Corley, President of the Company, due on demand, convertible into a maximum of 1,619,500 common shares | 111,350 | | 111,350 |
| 2% convertible notes payable to Douglas Goodsell, a related party, due on demand, convertible into a maximum of 519,828 common shares | 10,396 | | 10,396 |
| Total notes payable-related party | $ 935,101 | | $ 920,101 |
Convertible notes payable consists of the following: | | | |
| | September 30, 2018 | | March 31, 2018 |
| 7% convertible note payable to stockholder, due on August 15, 2019, convertible into a maximum of 250,000 common shares, | 50,000 | | - |
| 7% convertible note payable to stockholder, due on September 10, 2019, convertible into a maximum of 250,000 common shares, | 50,000 | | - |
| 7% convertible notes payable to stockholder, which is past due, convertible into a maximum of 250,000 common shares, | 50,000 | | 50,000 |
| 7% convertible notes payable to stockholder, due August 12, 2018 convertible into a maximum of 250,000 common shares, | 50,000 | | 50,000 |
| 4% convertible notes payable to a stockholder, due on demand, convertible into a maximum of 350,000 common shares | 175,000 | | 175,000 |
| 2% convertible notes payable to stockholders, due on demand, convertible into a maximum of 1,100,000 common shares | 25,000 | | 25,000 |
| Total notes payable | $ 400,000 | | $ 300,000 |
Long Term Convertible notes payable consists of the following: | | | |
| | September 30, 2018 | | March 31, 2018 |
| 7% convertible note payable to stockholder, due on August 15, 2019, convertible into a maximum of 250,000 common shares, | - | | 50,000 |
| 7% convertible note payable to stockholder, due on September 10, 2019, convertible into a maximum of 250,000 common shares, | - | | 50,000 |
| Total notes payable | $ - | | $ 100,000 |
On April 1, 2018, the Company converted $15,000 of the advances from an officer into a convertible note payable. The note bears interest of 2% and is convertible with the accrued interest into common shares of the Company at a rate of $0.025 per share.
In April 2018, our CEO and President acquired a $50,000 interest in a note payable-stockholder that was due May 17, 2018, On August 13, 2018 the Company paid this note with the issuance of 1,250,000 shares of stock. In addition, on August 13, 2018, The Company issued another 1,250,000 shares of stock to pay a note payable-stockholder in the amount of $50,000. A total of 2,500,000 shares of stock were issued to pay notes payable aggregating $100,000. The fair market value of the 2,500,000 shares issued was $117,500. The Company recognized a loss on conversion of the notes payable in the amount of $17,500.
NOTE 4 – RELATED PARTY TRANSACTIONS
Advances from Stockholder:
Advances from a stockholder at September 30, 2018 and March 31, 2018 was $31,000.
Advances from Officer:
Our CEO, Ryan Corley, has made advances to the Company in prior years. During the six months ended September 30, 2018 and the year ended March 31, 2018, respectively, the CEO made additional unsecured advances totaling $-0- and $15,500. During the six months ended September 30, 2018 and the year ended March 31, 2018, the Company made payments on these advances of $-0- and $500, respectively. At September 30, 2018 and March 31, 2018, respectively, advances from the CEO were $-0- and $15,000, respectively.
Accrued Interest - officer
The Company has notes payable to the CEO in the aggregate amount of $764,455 and $749,455 as of September 30, 2018 and March 31, 2018, respectively. Accrued interest owed on these notes at September 30, 2018 and March 31, 2018 is $212,506 and $204,861, respectively. These notes and accrued interest are convertible into 42,388,166 and 41,411,316 shares of restricted common stock of the Company, as of September 30, 2018 and March 31, 2018 respectively.
Advances from officer - related party
At September 30, 2018 and March 31, 2018, advances from the entity controlled by the CEO was $10,500 and notes payable totaled $160,250. Accrued interest owed on these notes at September 30, 2018 and March 31, 2018 is $36,557 and $35,188, respectively. These notes and accrued interest are convertible into 3,180,115 and 3,155,917 shares of restricted common stock of the Company, as of September 30, 2018 and March 31, 2018, respectively.
Oil and Gas Leases
During the six months ended September 30, 2018, the Company paid $100 in transfer fees to acquire a lease on an additional 640 acres in the Rocky Mountain range located in the state of Colorado for a 4-year term. The lease was acquired from our President and CEO. Each year, the Company is responsible for making additional lease payments of $2.50 per acre to keep the lease
The Company conducts its business from the office of its CEO, Ryan Corley, rent free.
NOTE 5 – STOCK OPTIONS
On July 24, 2001, the Company filed with the SEC Form S-8, for its 2002 Stock Option Plan, (the Plan). An aggregate amount of common stock that may be awarded and purchased under the Plan is 3,000,000 shares of the Company’s common stock.
On July 10, 2018, the Company extended and repriced options that were expiring. A total of 150,000 options were expiring, of these 100,000 options were extended for 1 years at an exercise price of $0.25 per option. The Company used the Black-Scholes option pricing method to determine if there were additional compensation expenses to recognize. The extension and repricing resulted in the recognition of $1,672 in compensation expense.
A summary of the status of the Company’s stock options as of September 30, 2018 is presented below:
| | | September 30, 2018 |
| Options outstanding at beginning of year | | | 1,290,000 | |
| Options granted | | | — | |
| Options exercised | | | — | |
| Options expired | | | (50,000 | ) |
| Options outstanding at end of year | | | 1,240,000 | |
The following table summarizes the information about the stock options as of September 30, 2018:
Weighted Average of Exercise Price | | Number Outstanding | | Weighted Average Remaining Contractual Life Years | | | Number Exercisable |
| 0.08 | | 900,000 | | | 3.80 | | 900,000 |
| 0.10 | | 240,000 | | | 3.80 | | 240,000 |
| 0.25 | | 100,000 | | | 0.80 | | 100,000 |
| $ 0.08 - 0.25 | | 1,240,000 | | | 3.56 | | 1,240,000 |
NOTE 6 – COMMON STOCK TRANSACTIONS
On July 16, 2018, the Company issued 600,000 common shares in exchange for $30,000 in cash.
On August 13, 2018, the Company issued 2,500,000 common shares to retire two note payable in the aggregate amount of $100,000. These notes were in default. Prior to retiring the note, our CEO acquired a one-half interest in the note. Of these shares, 1,250,000 were issued to the CEO as payment of the note. The fair market value of the 2,500,000 shares issued was $117,500. The Company recognized a loss on conversion of the notes payable in the amount of $17,500.
| ITEM 2. | MANAGEMENT’S DISCUSSION ANDANALYSISOF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS. |
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Exchange Act which represent the expectations or beliefs concerning future events that involve risks and uncertainties, including but not limited to the demand for Company products and services and the costs associated with such goods and services. All other statements other than statements of historical fact included in this Quarterly Report including, without limitation, the statements under “Management’s Discussion and Analysis or Plan of Operations” and elsewhere in the Quarterly Report, are forward-looking statements. While the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.
The following discussion of the results of operations and financial conditions should be read in conjunction with the financial statements and related notes appearing in this report.
EnXnet, Inc. (the “Company”) was formed under the laws of the State of Oklahoma on March 30, 1999. On August 7, 2015, the Company incorporated EnXnet Energy Company LLC. in the State of Colorado as a wholly owned subsidiary. EnXnet Inc. and its wholly owned subsidiary, EnXnet Energy Company, LLC. (“the Company”) is a natural gas and petroleum exploitation, development and production company engaged in locating and developing hydrocarbon resources, primarily in the Rocky Mountain region. The Company’s principal business strategy is to enhance stockholder value by generating and developing high-potential exploitation resources in these areas. The Company’s principal business is the acquisition of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases. The Company has leased property in Colorado and is currently searching for additional opportunities in the natural gas and petroleum industry. Our goal is to lease the oil and gas properties of acreage that has a high likelihood of becoming a producing property. We will require additional funding to drill and complete a producing natural gas and petroleum well.
The Company currently can satisfy its current cash requirements for approximately 90 days and will raise additional working capital by the sale of shares of the Company common stock to select perspective individuals and from additional borrowings. This plan should provide the additional necessary funds required to enable the Company to initiate its drilling program on the oil and gas lease properties.
The Company does not anticipate any significant cash requirements for the purchase of any facilities. The Company currently has no full-time employee on the payroll.
Results of Operations – Three months ended September 30, 2018 and 2017.
The Company incurred operating expenses of $26,238 and $ 46,983 for the three months ended September 30, 2018 and 2017, respectively, a decrease of $20,745. The decrease in operating expenses for the three months ended September 30, 2018 when compared to the three-month period ended September 30, 2017 consist of:
| · | Increase in the impairment of oil and gas properties of $15,366 |
| · | Impairment of oil and gas properties, unproved increased $15,366 for the three months ended September 30, 2018 from the previousyear.In the current period the Company determined that carrying value of the unproved oil and gas properties was not supported as we have not been able to raise funds to complete a drilling program on these properties. |
| · | Decrease in Consulting services of $10,524. |
| · | Consulting and payroll expenses for the prior year included the compensation value of stock options of $9,946 that were extended, and the valuation of common stock issued for compensation of $2,250. In the current year stock options to a consultant were extended with a compensation value of $1,672. |
| · | Decrease in Payroll expense of $17,498. |
| · | Payroll expenses for the prior year included the compensation value of stock options of $12,098 that were extended, and the valuation of common stock issued for compensation of $5,400. |
| · | Decrease in professional services of $8,360 |
| · | Professional services in the three months ended September 30, 2018 includes fees for our year end reporting cycle. Similar fees for the prior year’s annual reporting cycle were not recorded until the following quarter when the annual report was filed. |
During the three months ended September 30, 2018 and 2017 we incurred net losses of $53,672 and $62,039, respectively.
Results of Operations – Six months ended September 30, 2018 and 2017.
The Company incurred operating expenses of $62,086 and $57,210 for the six months ended September 30, 2018 and 2017, respectively, an increase of $4,876. The increase in operating expenses for the six months ended September 30, 2018 when compared to the six-month period ended September 30, 2017 consist of:
| · | Increase in the impairment of oil and gas properties of $32,494 |
| · | Impairment of oil and gas properties, unproved increased $32,494 for the six months ended September 30, 2018 from the previousyear.In the current period the Company determined that carrying value of the unproved oil and gas properties was not supported as we have not been able to raise funds to complete a drilling program on these properties. |
| · | Decrease in Consulting services of $10,524. |
| · | Consulting and payroll expenses for the prior year included the compensation value of stock options of $9,946 that were extended, and the valuation of common stock issued for compensation of $2,250. In the current year stock options to a consultant were extended with a compensation value of $1,672. |
| · | Decrease in Payroll expense of $17,498. |
| · | Payroll expenses for the prior year included the compensation value of stock options of $12,098 that were extended, and the valuation of common stock issued for compensation of $5,400. |
During the six months ended September 30, 2018 and 2017 we incurred net losses of $100,403 and $85,635, respectively.
Liquidity and Capital Resources.
From inception through September 30, 2018, the Company has issued 58,376,518 shares of its Common Stock to officers, directors and outside shareholders. The Company has little operating history and no material assets other than the oil and gas cash bond and 22,507 acres of mineral lease properties. The Company has $8,922 of unrestricted cash and $2,313 of restricted cash as of September 30, 2018.
The Company has incurred operating losses each year since its inception and has a working capital deficit at September 30, 2018. At September 30, 2018 and March 31, 2018, the working capital deficit was $2,059,647 and $2,008,416, respectively. The working capital deficit and operating losses raise substantial doubt about the Company’s ability to continue as a going concern. As a result of these factors, the Company’s independent certified public accountants have included an explanatory paragraph in their reports on the Company’s March 31, 2018 financial statements which expressed substantial doubt about the Company’s ability to continue as a going concern.
Contractual Obligations.
At the present time, the Company has no material commitments for capital expenditures. If capital expenditures are required after operations commence, the Company will pay for the same through the sale of common stock, or through loans from third
parties. There is no assurance, however, that such financing will be available and in the event such financing is not available, the Company may have to cease operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES.
Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements. These statements have been prepared in accordance with generally accepted accounting principles in the United States of America.
Use of estimates in preparation of financial statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, based on historical experience, and 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 sources. Actual results may differ from these estimates under different assumptions or conditions. The following critical accounting policies rely upon assumptions, judgments and estimates and were used in the preparation of our consolidated financial statements:
Cash and cash equivalents
Cash equivalents are highly liquid investments with an original maturity of three months or less.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States necessarily requires management to make estimates and assumptions that affect the amounts reported in the financial statements. We regularly evaluate estimates and judgments based on historical experience and other relevant facts and circumstances. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Under FASB ASC 825 the Company is required to disclose the fair value of financial instruments for which it is practicable to estimate value.
The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and debt. The Company believes that the carrying amounts approximate fair value for all such instruments.
FASBASC 820 defines fair value, establishes a framework for measurement, and expands disclosure about fair value measurements.TopicNo. 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).TopicNo. 820 classifies the inputs used to measure fair value into the following hierarchy:
| | Level 1: | Quoted prices for identical assets or liabilities in active markets. |
| | Level 2: | Quoted market prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. |
| | Level 3: | Pricing inputs are unobservable for the assets and liabilities, including situations in which there is little to no market activity. |
Stock Based Compensation
FASB ASC 718 requires that measurement of the cost of employee services received in exchange for an award of equity instruments be based on the grant-date fair value of the award. Such costs are recorded over the periods employees are required to render services in exchange for the awards.
Income taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.
Wehave net operating loss carryforwards available to reduce future taxable income. Future tax benefits for these net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not.Tothe extent that we will not realize a future tax benefit, a valuation allowance is established.
Basic and diluted net loss per share
Basic loss per share is computed using the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the dilutive effects of common stock equivalents on an “as if converted” basis. For the periods ended September 30, 2018 and 2017, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share
Recent Accounting Pronouncements
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for all interim and annual reporting periods beginning after December 15, 2017. The attached financial statements include the adoption of ASU 2016-18. The adoption did not have a material impact on the Company’s Consolidated Financial Statements “, other than certain reclassifications have been made in the Company’s consolidated statements of cash flows to conform with the current period presentation.
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operation, financial position or cash flows.
Unaudited Financial Statements
The accompanying unaudited financial statements for the six months ended September 30, 2018 have been prepared in accordance with generally accepted accounting principles for interim financia1 information. In the opinion of management all adjustments considered necessary for a fair presentation, which consist of normal recurring adjustments, have been included. The accompanying unaudited financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s March 31, 2018 Annual Report on Form 10-K.
Off Balance Sheet Arrangements
Wecurrently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
CURRENT TRADING MARKET FOR THE COMPANY’S SECURITIES.
Currently the Company’s stock is traded under the symbol “EXNT” on the OTC PINK. There can be no assurance that an active or regular trading market for the common stock will develop or that, if developed, will be sustained. Various factors, such as operating results, changes in laws, rules or regulations, general market fluctuations, changes in financial estimates by securities analysts and other factors may have a significant impact on the market of the Company securities. The market price for the securities of public companies often experience wide fluctuations that are not necessarily related to the operating performance of such public companies such as high interest rates or impact of overseas markets.
| ITEM 3. | QUANTITATIVEANDQUALITATIVEDISCLOSURES ABOUT MARKET RISK. |
Not Applicable
| ITEM 4. | CONTROL AND PROCEDURES. |
Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures (as defined in Rules 13(a)-15(e) under the Securities Act of 1934, as amended) are not effective to ensure that all information required to be disclosed by us in the reports filed or submitted by us under the Securities and Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to the management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate and allow timely decisions regarding required disclosure.
Changes in Internal Controls. In connection with the above-referenced evaluation, no change in our internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS. |
The Company is not involved in litigation at this time. We may from time to time be a party to various legal actions in the ordinary course of business. There can be no assurance that the Company will not be a party to litigation in the future that could have an adverse effect on the Company.
There have been no material changes with regard to the risk factors previously disclosed in our most recent Annual Report on Form 10- K.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None
| ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K. |
The following are included herein: The following are included herein:
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 14thday of November 2018.
| | ENXNET, INC. |
| | (the “Registrant”) |
| | |
| | BY: | RYAN CORLEY |
| | | Ryan Corley |
| | | President, Principal Executive Officer and a member of the Board of Directors |
| | | |
| | BY: | STEPHEN HOELSCHER |
| | | Stephen Hoelscher |
| | | Principal Financial Officer and Principal Accounting Officer |
EXHIBIT INDEX
