☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 333-148005
LINGERIE FIGHTING CHAMPIONSHIPS, INC.
(Name of small business issuer as in its charter)
Nevada
47-1399226
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
6955 North Durango Drive, Suite 1115-129
Las Vegas, NV 89149
(Address of principal executive offices, Zip Code)
(702) 505-0743
(Registrant's telephone number, including area code)
Securities Registered under Section 12(b) of the Exchange Act: None
Securities Registered under Section 12(g) of the Exchange Act: Common stock, par value $0.001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant Section 13 or 15(d) of the Exchange Act. ☐ Yes ☒ No
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections
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 ☒ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☐ Yes ☒ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of registrant’s voting and non-voting common equity held by non-affiliates (as defined by Rule 12b-2 of the Exchange Act) computed by reference to the average bid and asked price of such common equity on June 30, 2020, was $201,183.
The number of shares of registrant's common stock outstanding as of May 28, 2021 was 2,773,832,045.
This annual report on Form 10-K contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this annual report on Form 10-K. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this annual report on Form 10-K reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward- looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this annual report on Form 10-K, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this annual report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
As used in this Annual Report, “we,” “us,” “our,” “LFC,” “Company” or “our Company” refers to Lingerie Fighting Championships, Inc.
History
We were incorporated in Nevada on November 29, 2006 under the name Sparking Events, Inc., and on September 16, 2013 our corporate name was changed to Cala Energy Corp., (formally, Xodtec LED, Inc.) under which we were engaged in the business of offering services, such as enhanced oil recovery and material supplies, to gas and oil fields predominantly located in Southeast Asia. We were not successful in our efforts and discontinued this line of business.
On March 31, 2015, the Company, pursuant to share exchange agreement (the "Share Exchange Agreement"), among the Company, Lingerie Fighting Championships, Inc. (“LFC”), and the holders of all of the outstanding common stock and convertible notes of LFC exchanged their common stock and convertible notes of LFC for a total of 16,750,000 shares of common stock, which represented 84.70% of the Company's common stock after giving effect to the issuance of the shares pursuant to the Share Exchange Agreement and the shares of common stock issued in the private placement described in the following paragraph. The issuance of the 16,750,000 shares of common stock to the former holders of LFC's common stock and convertible notes in exchange for the capital stock of LFC is referred to as the reverse acquisition transaction. The sole director and chief executive officer of LFC became a director and the chief executive officer of the Company. As a result of the reverse acquisition, the Company's business has become the business of LFC.
As a result of the reverse acquisition with LFC, we ceased to be a shell company on March 31, 2015.
Effective as of April 1, 2015, we changed our name to “Lingerie Fighting Championships, Inc.” a name which more accurately represents our new business. We effected the name change by virtue of a short form merger, pursuant to which LFC (our wholly owned subsidiary after the LFC Acquisition) merged with and into the Company, with the Company remaining as the surviving parent corporation. In connection with the name change, we submitted to FINRA a voluntary request for the change of our OTC trading symbol. Our Common Stock now trades under the symbol “BOTY”.
As a result of, and in connection with, the reverse acquisition, the Company changed its fiscal year to December 31, which was LFC’s fiscal year, from a fiscal year ending February 28.
On April 20, 2015, the Company effected a one-for-800 reverse split, pursuant to which each share of common stock was converted into, and became 1/800 of a share of common stock, with fractional shares being rounded up to the next higher whole number of shares. As a result of the reverse split, the 339,757,357 shares of common stock, then outstanding, became and were converted into 424,977 shares. All references to shares of common stock and per share information retroactively reflect the reverse split.
On September 14, 2016, Lingerie Fighting Championships, Inc., a Nevada Corporation (the “Company”) filed an amendment to its articles of incorporation (the “Amendment”) with the Secretary of State of the State of Nevada, which, among other things, established the designation, powers, rights, privileges, preferences and restrictions of the Series A Preferred Stock, $0.001 par value per share (the “Series A Preferred Stock”).
Among other provisions, each one (1) share of the Series A Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding shares of common stock of the Company eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (z) the Numerator. For purposes of illustration only, if the total issued and outstanding shares of common stock of the Company eligible to vote at the time of the respective vote is 5,000,000, the voting rights of one share of the Series A Preferred Stock shall be equal to 102,036 (0.019607 x 5,000,000) / 0.49) – (0.019607 x 5,000,000) = 102,036).
Fifty-one (51) shares of Series A Preferred Stock were authorized and fifty-one (51) shares of Series A Preferred Stock were issued to Shaun Donnelly, the Company’s Chief Executive Officer and a director of the Company.
On November 22, 2016, the Company filed a Certificate of Amendment to the Company’s Articles of Incorporation (the “Amendment”) with the Secretary of State of Nevada to increase the number of authorized shares of common stock, par value $0.001 per share, from four hundred million (400,000,000) shares to one billion (1,000,000,000) shares. A true and correct copy of the Amendment is filed as Exhibit 3.1 to this report.
On January 23, 2017, the Company filed a Certificate of Amendment to the Company’s Articles of Incorporation (the “Amendment”) with the Secretary of State of Nevada to increase the number of authorized shares of common stock, par value $0.001 per share, from one billion (1,000,000,000) shares to one billion two hundred million (1,200,000,000) shares. The Company did not timely comply with the requirements of Regulation 14C under the Exchange Act for the above referenced increases in the Company’s authorized common shares. This would have required us to circulate an information statement describing the corporate actions taken above by the written consent of a majority of our shareholders at least 20 days prior to the effective date of the corporate action. We did however have super majority shareholder consent as required for amending the articles of incorporation. The failure to initially comply with Regulation 14C in a timely manner was inadvertent, and while not probable, could cause the SEC to bring an enforcement action or commence litigation against us for failure to comply with Regulation 14C. Such enforcement could subject us to penalties including the payment of fines or damages. Any such claims or actions could cause us to expend financial resources to defend ourselves, and could divert the attention of our management from our core business.
On November 2, 2017, the Company filed a Certificate of Amendment to the Company’s Articles of Incorporation (the “Amendment”) with the Secretary of State of Nevada to increase the number of authorized shares of common stock, par value $0.001 per share, from one billion two hundred million (1,200,000,000) shares to five billion (5,000,000,000) shares. A true and correct copy of the Amendment is filed as Exhibit 3.1 to this report.
Our Business
Our LFC business and brand is focused on building and establishing a sports entertainment league that utilizes wrestling and mixed martial arts (“MMA”) fighting techniques for purposes of providing entertainment. We seek to promote and market our brand, our programming, our events and our products.
Our mission is to establish the popularity of our LFC league and brand based on holding live events and to promote our athletes via a reality series and merchandise such a t-shirts and calendars. Our uniqueness is derived from our predominantly all female league structure, where a vast array of beautiful, attractive and unique women engage in wrestling and MMA fighting techniques against one another for purposes of delivering high quality entertainment to mature audiences.
Our management believes that the LFC league and our unique approach in applying a predominantly all female league structure to wrestling and mixed martial arts gives us a substantial competitive advantage to build the popularity of the LFC league in general.
Our Events
Our operations seek to be organized around the development, promotion and distribution of our live events and televised entertainment programming. We also seek to develop branding and merchandising avenues for revenues.
Live Events
Our live events are a unique mix of MMA and professional wrestling performed before a live audience and recorded and edited by our in-house production team.
To date, we have hosted 13 live events across the U.S. and Europe as well as more than 80 episodes of a reality series which are normally 30 minutes each. Our brand is growing on social media where our content has been viewed by more than 50 million people.
Video Programming
We are an independent producer of video programming for digital home video and intend to develop such video programming for broadcast television, cable television, pay-per-view and video-on-demand markets. We produce scripted style fights featuring attractive and athletic females of the LFC league clothed in lingerie. Our featured episodes, called the Lingerie Fighting Championships, include live action content stylized and modeled in the format of a reality television series.
We will produce and own our television programming and video library and believe that pay-per-view and video-on- demand television distribution presents opportunities to generate revenue for our business. In an effort to build our LFC brand, we plan to distribute our live event programming through pay-per-view and video-on-demand television outlets in the future.
Home Video
We expect to pursue opportunities in the home video market by licensing, on a distribution fee and/or royalty basis our growing video library to third parties to develop, produce, manufacture, and sell DVDs for the home video market. We hope to develop a video library with proprietary material from our live events, television broadcasts, special events and behind the scenes content of live events. To date, we have developed and produced an LFC DVD entitled “Lingerie Fighting Championships: Lace vs Leather” which is currently being sold on the LFC official website (www.lingeriefc.com) as well as Amazon.com.
It is intended that we will continue to produce develop our video programming to be sold in DVD volume installments in retail stores and on-line via such e-commerce platforms such as the LFC official site (www.lingeriefc.com) and other third party retailers including, but not limited to, Amazon® and iTunes®. We are currently in discussion with various other retailers specializing in home video distribution. All references herein to Amazon®, iTunes®, YouTube® or Facebook® are to websites operated by such entities and we do not have any rights, affiliation or license with them other than the presence of our media or products on such media platforms as set forth herein.
Online Programming
We utilize the Internet to communicate with our fans and market and distribute our various programming. Through our network of websites and social media, our fans and customers can obtain the latest news and information on the LFC, purchase our live event tickets, home video programming, and purchase our branded merchandise. Our main site is www.lingeriefc.com.
Branded Merchandise
Licensing and Direct Sales. We believe that licensing of LFC names, logos and copyrighted works on a variety of retail products presents a further opportunity to generate revenues. As our brand grows, we expect to pursue greater opportunities to expand our licensing efforts through a more comprehensive licensing program.
Competition
Competition for Viewers. The entertainment market in which we operate has a limited fan base and is highly competitive. We must compete for the time and attention of viewers with more established content programming and entertainment value. We compete on the basis of a number of factors, including quality of experience, relevance, accessibility, perceptions of ad load, brand awareness and reputation.
List of Competitors. Our events, we anticipate, caters to a niche audience. Our audience, we anticipate, will consist primarily of a mature audience with an appreciation of MMA and contact sports and professional wrestling. We compete with athletic events as well as mature audience entertainment. While we do pride our business model on having an athletic appeal, we do not deem ourselves as a conventional full contact sport, and our events are designed as scripted fictional entertainment. For additional details on risks related to competition for listeners, please refer to the section entitled “Risk Factors.”
Sports Entertainment Providers. We compete on a national basis primarily with World Wrestling Entertainment, Inc., and its subsidiaries (collectively, the “WWE”) and Zuffa, LLC, the American sports promotion company specializing in mixed martial arts and parent company of the Ultimate Fighting Championship league (collectively, the “UFC”). We will have to compete with WWE and the UFC in many aspects of our business, including viewership, application of mixed martial arts, access to arenas, the sale and licensing of branded merchandise and distribution channels for our televised programs. We also directly compete to find, hire and retain talented performers. WWE and UFC has substantially greater financial resources than we do, and already has an established fan base and following, and are affiliated with television cable networks on which WWE’s and UFC’s programs are aired. Other sources of competition in our sports entertainment market are regional promoters of wrestling events.
•
Television Network Scheduling. Conventional sports channels may not accept us or may limit us to less popular time slots. Because we are not a conventional sports league, and due to the mature target audience for our events, mainstream sporting channels may not accept us or may limit our events to mid-day, late night or "half time" type channel slots, as opposed to prime-time televised scheduling.
•
Other Forms of Media. We compete for the time and attention of our listeners with providers of other forms of in- home and mobile entertainment. We rely on having a modest but growing YouTube® following. To the extent existing or potential viewers choose to watch cable television, stream video from on-demand services such as Netflix, Hulu, VEVO or YouTube or play interactive video games on their home-entertainment system, computer or mobile phone rather than view our LFC programming or attend our live events, these content services pose a competitive threat.
Government Regulation
Live Events. In various states in the United States and some foreign jurisdictions, athletic commissions and other applicable regulatory agencies require fighting leagues to obtain licenses for promoters, medical clearances and/or other permits or licenses for performers and/or permits for events in order for us to promote and conduct live events. Since we are scripted and not a full contact competitive sport, we are not subject to such regulation. If rules change or if our business structure changes or if we are perceived as being an athletic full contact sport, we could become subject to such regulation. In the event that we fail to comply with the regulations of a particular jurisdiction, we may be prohibited from promoting and conducting our live events in that jurisdiction. The inability to present our live events over an extended period of time or in a number of jurisdictions could lead to a decline in the various revenue streams generated from our live events, which could adversely affect our operating results.
Television Programming. The production of television programming by independent producers is not directly regulated by the federal or state governments, but the marketplace for television programming in the United States and internationally is substantially affected by government regulations applicable to, as well as social and political influences on, television stations, television networks and cable and satellite television systems and channels. We voluntarily designate the suitability of each of our television shows using standard industry ratings. Changes in governmental policy and private- sector perceptions could further restrict our program content and adversely affect our levels of viewership and operating results.
Online Programming. The Company intends to conduct business on the internet and will be subject to a number of foreign and domestic laws and regulations relating to consumer protection, information security, data protection and privacy, among other things. Many of these laws and regulations are still evolving and could be interpreted in ways that could harm our business. In the area of information security and data protection, the laws in several states require companies to implement specific information security controls to protect certain types of information. Likewise, all but a few states have laws in place requiring companies to notify users if there is a security breach that compromises certain categories of their information. Any failure on our part to comply with these laws may subject us to significant liabilities.
Intellectual Property
Trademarks and Copyrights. We believe that intellectual property and merchandising will be material to our business and we will expend cost and effort in an attempt to develop and protect our intellectual property and to maintain compliance vis-à-vis other parties' intellectual property. A principal focus of our efforts is to protect the intellectual property relating to our originally created characters portrayed by our performers, which encompasses images, likenesses, names and other identifying indicia of these characters. We have registered the domain name www.lingeriefc.com as our website. We currently do not have any registered trademarks. We may, however, seek to register or assert common law rights with respect to the names, terms, slogans, titles and event names we have been using to date.
We anticipate some revenues from branding merchandise, apparel, and particularly lingerie and swimwear using both our and other licensed brands. To accomplish this, we will have to rely on a combination of intellectual property rights, including trade secrets, copyrights, trademarks, contractual restrictions, technological measures and other methods. Further, we seek to enforce our intellectual property rights by, among other things, searching the internet to ascertain unauthorized use of our intellectual property, seizing goods that feature unauthorized use of our intellectual property and seeking restraining orders and/or damages in court against individuals or entities infringing our intellectual property rights. Our failure to curtail piracy, infringement or other unauthorized use of our intellectual property rights effectively, or our infringement of others' intellectual property rights, could adversely affect our operating results. We may be the subject of trademark and copyright infringements suits from other companies that seek to protect their names or marks on the basis of similarity or dilution, and no assurance can be made that we will be able to defend such actions.
Employees
The Company has one employee, Shaun Donnelly, our Chief Executive Officer and Chief Financial Officer. Cast and crew are hired on a contract basis for each live event.
Available Information
Our website address is www.lingeriefc.com. We do not intend our website address to be an active link or to otherwise incorporate by reference the contents of the website into this Report. The public may read and copy any materials the Company files with the U.S. Securities and Exchange Commission (the “SEC”) at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0030. The SEC maintains an Internet website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
We do not own or lease any property. Our mailing address is 6955 North Durango, Suite 1115-129, Las Vegas, NV, 89149, telephone (702) 527-2942. Our website is www.lingeriefc.com.
Other than described below, we are not currently involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On August 24, 2018, Mr. Jeffrey Stone, a former consultant of the Company, filed suit against the Company and our CEO, Mr. Shaun Donnelly, in New York County Civil Court alleging that the Company failed to provide some of the promised shares of common stock as compensation for services rendered pursuant to an agreement whereby Mr. Stone was to provide investor relations services to the Company. This suit was settled on April 12, 2019 for $5,000.
Our common stock trades on the OTC Pink under the symbol BOTY. The former symbol for our common stock was OILL and, after the reverse stock split, OILLD. The symbol was changed to BOTY on April 29, 2015.
(b) Holders
As of May 28, 2021, we had approximately 248 shareholders of our common stock. Such number of record holders was derived from the records maintained by our transfer agent, Island Stock Transfer. This figure does not include those shareholders whose certificates are held in the name of broker-dealers or other nominees.
(c) Dividends
We have never paid any cash dividends on our common shares, and we do not anticipate that we will pay any dividends with respect to those securities in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion development of our business. The payment of future cash dividends is subject to the discretion of the Board of Directors and will depend upon the Company's earnings (if any), general financial condition, cash flows, capital requirements and other considerations deemed relevant by the Board of Directors.
(d) Securities Authorized for Issuance under Equity Compensation Plan
The following table summarizes the equity compensation plans under which our securities have been or may be issued as of December 31, 2020.
Plan Category
Number of securities to
be issued
upon exercise
of outstanding options
and
warrants
Weighted-
average
exercise
price of
outstanding
options and
warrants
Number of securities remaining
available for
future issuance under equity compensation
plans
Equity compensation plans approved by security holders
0
$
0
0
Equity compensation plan not approved by security holders
0
$
0
0
At December 31, 2020, we did not have any equity compensation plans that were not approved by stockholders.
Our transfer agent is VStock Transfer, LLC., 18 Lafayette Place Woodmere, NY 11598. Their telephone number is (212) 828-8436.
Recent Sales of Unregistered Securities
During the year ended December 31, 2020, the Company issued 317,919,774 shares of common stock for conversion of convertible note accrued interest of $12,717.
During the year ended December 31, 2019, the Company issued 1,250,779,950 shares of common stock for conversion of convertible note principal amount of $43,067 and accrued interest of $1,153.
Rule 10B-18 Transactions
During the year ended December 31, 2020, there were no repurchases of the Company’s common stock by the Company.
The following discussion of the results of our operations and financial condition should be read in conjunction with our financial statements and the related notes, which appear elsewhere in this report. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ from results discussed in the forward-looking statements, see "Forward Looking Statements."
Overview
LFC is a media company focused on the development, production, promotion and distribution of original entertainment which we plan to make commercially available predominantly through live entertainment events, as well as through digital home video, broadcast television networks, video-on-demand and digital media channels. As a result, we have ceased to be a shell company. Effective as of April 1, 2015, we changed our name to "Lingerie Fighting Championships, Inc.," (by virtue of the short form merger with our new LFC subsidiary) to reflect our new business focus.
Results of Operations
Year ended December 31, 2020 as compared to the Year ended December 31, 2019
Our operating results for the year ended December 31, 2020 and December 31, 2019, and the changes between those periods for the respective items are summarized as follows:
We generated revenues of 27,776 and $27,376 for the year ended December 31, 2020 and 2019, respectively. The Company’s revenue derives from the development, promotion and distribution of our live events and televised entertainment programming.
Cost of Services
We incurred total cost of services of $27,652 and $38,819 for the year ended December 31, 2020 and 2019, respectively. The cost of services incurred consist of labor, material, equipment and subcontractor expenses.
Operating Expenses
We incurred total operating expenses of $233,052 and $210,437 for the year ended December 31, 2020 and 2019, respectively. The increase in operating expenses was primarily due to the increase in professional fees and travel expense.
Other Income (Expenses)
We incurred total other expense of $2,173,096 and $2,079,663 for the year ended December 31, 2020 and 2019, respectively. The increase in other expense was mainly attributed to $1,922,876 loss on change in fair value of derivative liabilities from the convertible notes and warrants during the year ended December 31, 2020 as compared to loss on change in fair value of derivative liabilities of $1,842,035 during the year ended December 31, 2019.
Net Income (Loss)
We incurred net loss of $2,406,024 and $2,301,543 during the year ended December 31, 2020 and 2019, respectively. The increase in our net loss was mainly attributed to the increase in operating expenses and other expense during the year ended December 31, 2020.
Liquidity and Capital Resources
December 31,
December 31,
Changes
Working Capital Data:
2020
2019
Amount
%
Current Assets
$
4,142
$
43,707
$
(39,565
)
(91
)%
Current Liabilities
$
5,883,009
$
4,410,428
1,472,581
33
%
Working Capital Deficiency
$
(5,878,867
)
$
(4,366,721
)
(1,512,146
)
35
%
At December 31, 2020, we had a working capital deficiency of $5,878,867 and an accumulated deficit of $8,197,588. The Company intends to fund future operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending December 31, 2020.
The ability of the Company to realize its business plan is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The following table sets forth certain information about our cash flow during the year ended December 31, 2020 and December 31, 2019:
Year Ended
December 31,
Changes
Cash Flows Data:
2020
2019
Amount
%
Cash Flows used in Operating Activities
$
(78,915
)
$
(164,732
)
$
85,817
(52
)%
Cash Flows provided by Financing Activities
39,350
205,000
(165,650
)
(81
)%
Net increase (decrease) in cash during period
$
(39,565
)
$
40,268
$
(79,833
)
(198
)%
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities.
During the year ended December 31, 2020, net cash flows used in operating activities was $78,915, consisting of a net loss of $2,406,024, increased by accrued interest written off of $21,860, and decreased by loss on change in fair value of derivative liabilities of $1,922,876 and amortization of debt discount of $118,934 and net changes in operating assets and liabilities of $307,159.
During the year ended December 31, 2019, net cash flows used in operating activities was $164,732, consisting of a net loss of $2,301,543, increased by convertible note written off of $100,000 and accounts payable written off of $7,821, and decreased by loss on change in fair value of derivative liabilities of $1,842,035 and amortization of debt discount of $200,521 and net changes in operating assets and liabilities of $202,076.
Cash Flows from Investing Activities
There was no investing activities during the year ended December 31, 2020 and December 31, 2019.
Cash Flows from Financing Activities
During the year ended December 31, 2020, net cash provided by financing activities was $39,350 consists of proceeds from the issuance of convertible notes of $216,100, offset by repayment to related party of $1,750 and repayment of convertible notes and redemption of warrants of $175,000.
During the year ended December 31, 2019, net cash provided by financing activities was $205,000 consists of proceeds from the issuance of convertible notes of $203,250 and advancement from related party of $1,750.
Off-Balance Sheet Arrangements
As of December 31, 2020, we had no off-balance sheet arrangements.
The preparation of financial statements in accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. A change in managements’ estimates or assumptions could have a material impact on our financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates. Our financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented.
Revenue Recognition
The Company recognizes revenue from the sale of products and services in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:
Step 1: Identify the contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue when the entity satisfies a performance obligation
Convertible Instruments and Derivatives
The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities.”
Fair Value Measurement
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures,” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 –
quoted prices in active markets for identical assets or liabilities
Level 2 –
quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 –
inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
The derivative liability in connection with the conversion feature of the convertible debt, classified as a level 3 liability, is the only financial liability measured at fair value on a recurring basis.
The Company accounts for income taxes pursuant to FASB ASC 740 “Income Taxes”. Pursuant to ASC 740 deferred income taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences, and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority.
Recent accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with Conversion and Other Options”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its financial statements.
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. For the Company, the new standard was effective on January 1, 2021 and we do not expect the adoption of this guidance to have a material impact on our financial statements.
To the shareholders and the board of directors of Lingerie Fighting Championships, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Lingerie Fighting Championships, Inc. (the "Company") as of December 31, 2020 and 2019, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2018
Lingerie Fighting Championships, Inc. (the “Company”) is a Nevada corporation incorporated on November 29, 2006 under the name Sparking Events, Inc. The Company’s corporate name was changed to Xodtec Group USA, Inc. in June 2009, Xodtec LED, Inc. in May 2010, Cala Energy Corp. in September 2013 and Lingerie Fighting Championships, Inc. on April 1, 2015.
The Company focuses on developing, producing, promoting, and distributing entertainment through live entertainment events, digital home videos, broadcast television networks, video on demand, and digital media channels in the United States. It offers wrestling and mixed martial arts fights featuring women under the LFC brand name.
NOTE 2 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company uses the accrual basis of accounting and has adopted a December 31 fiscal year end.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company continually evaluates its estimates and judgments. The Company bases its estimates and judgments on historical experience and other factors that it believes to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. The Company had $4,142 and $43,707 in cash and cash equivalents as at December 31, 2020 and December 31, 2019, respectively.
Revenue Recognition
The Company recognizes revenue from the sale of products and services in accordance with ASC 606,“Revenue Recognition” following the five steps procedure:
Step 1: Identify the contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue when the entity satisfies a performance obligation
The Company’s revenue derives from the development, promotion and distribution of our live events and televised entertainment programming. For the year ended December 31, 2020 and 2019, the Company recognized revenue of $27,776 and $27,376 and cost of sales of $27,652 and $38,819, resulting in gross profit of $124 and gross loss of $11,443, respectively.
The Company computes basic and diluted net loss per share amounts in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the reporting period. Diluted loss per share reflects the potential dilution that could occur if convertible notes to issue common stock were converted resulting in the issuance of common stock that could share in the loss of the Company.
For the year ended December 31, 2020 and 2019, convertible notes and warrants were dilutive instruments and were not included in the calculation of diluted loss per share as their effect would be antidilutive.
December 31,
December 31,
2020
2019
(Shares)
(Shares)
Convertible notes payable
10,031,194,872
30,046,590,267
Warrants
5,438,166,666
969,833,333
15,469,361,538
31,016,423,600
Related Party Balances and Transactions
The Company follows FASB ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transaction. (See Note 8)
Beneficial Conversion Feature of Convertible Debt
The Company accounts for convertible debt in accordance with the guidelines established by FASB ASC 470-20, “Debt with Conversion and Other Options”. The Beneficial Conversion Feature (“BCF”) of convertible debt is normally characterized as the convertible portion or feature of certain debt that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of convertible debt when issued, and also records the estimated fair value. Beneficial Conversion Features that are contingent upon the occurrence of a future event are recorded when the event is resolved.
Convertible Instruments and Derivatives
The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities.”
Share-Based Compensation
The Company measures the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Employee awards are accounted for under ASC 718 - where the awards are valued at grant date. Awards given to nonemployees are accounted for under ASC 505 where the awards are valued at earlier of commitment date or completion of services. Compensation cost for employee awards is recognized over the vesting or requisite service period. The Black-Scholes option-pricing model is used to estimate the fair value of options or warrants granted.
Fair Value Measurement
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures,” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 –
quoted prices in active markets for identical assets or liabilities
Level 2 –
quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 –
inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
The derivative liability in connection with the conversion feature of the convertible debt, classified as a level 3 liability, is the only financial liability measured at fair value on a recurring basis. (See Note 7)
The following table summarizes fair value measurement by level at December 31, 2020 and December 31, 2019, measured at fair value on a recurring basis:
December 31, 2020
Level 1
Level 2
Level 3
Total
Assets
None
-
-
-
-
Liabilities
Derivative liabilities
-
-
4,610,130
4,610,130
December 31, 2019
Level 1
Level 2
Level 3
Total
Assets
None
-
-
-
-
Liabilities
Derivative liabilities
-
-
3,068,168
3,068,168
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with Conversion and Other Options”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its financial statements.
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. For the Company, the new standard was effective on January 1, 2021 and we do not expect the adoption of this guidance to have a material impact on our financial statements.
Management has considered all other recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The Company has generated nominal revenues since inception, has sustained losses since its organization and requires funding to generate revenue. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company can give no assurances that it can or will become financially viable and continue as a going concern.
NOTE 4 – STOCKHOLDERS DEFICIT
Preferred Stock
The authorized preferred stock consists of 10,000,000 shares with a par value $0.001 per share. The board of directors has broad discretion in setting the rights, preferences and privileges of one or more series of preferred stock.
On September 3, 2016, the Company issued 51 Series A preferred shares to the Chief Executive Officer. The Series A preferred shares have voting rights, resulting in the Series A stockholder holding in aggregate approximately 51% of the total voting power of all issued and outstanding voting capital of the Company. The valuation of the preferred shares was completed by the Company based on the change in voting percentage rights before and after the Series A shares were issued. The value of the Series A shares is $42,669 and was expensed.
There were 51 and 51 preferred shares issued and outstanding as at December 31, 2020 and 2019.
Common Stock
The Company has authorized 5,000,000,000 shares with a par value $0.001 per share.
During the year ended December 31, 2020, the Company issued 317,919,774 shares of common stock for conversion of convertible note accrued interest of $12,717.
During the year ended December 31, 2019, the Company issued 1,250,779,950 shares of common stock for conversion of convertible note principal amount of $43,067 and accrued interest of $1,153.
As of December 31, 2020 and December 31, 2019, the shares of common stock issued and outstanding was 2,339,101,663 and 2,021,181,889, respectively.
NOTE 5 – WARRANTS
During the year ended December 31, 2020 and 2019, in conjunction with the issuance of convertible notes, the Company issued warrants to purchase 4,656,666,666 and 824,833,333 shares of common stock, exercisable for five years from issuance at weighted average exercise price of $0.0001 per share.
The below table summarizes the activity of warrants exercisable for shares of common stock during the year ended December 31, 2020 and 2019:
Number
of Shares
Weighted-
Average Exercise Price
Balances as of December 31, 2018
145,000,000
$
0.0003
Granted
824,833,333
0.0002
Redeemed
-
-
Exercised
-
-
Forfeited
-
-
Balances as of December 31, 2019
969,833,333
$
0.0002
Granted
4,656,666,666
0.0001
Redeemed
(188,333,333
)
0.0003
Exercised
-
-
Forfeited
-
-
Balances as of December 31, 2020
5,438,166,666
$
0.0001
The fair value of each warrant on the date of grant is estimated using the Black-Scholes option valuation model. The following weighted-average assumptions were used for options granted during the year ended December 31, 2020 and 2019:
Year Ended
December 31,
2020
2019
Exercise price
$0.0001 -$ 0.0003
$
0.0003
Expected term
4.61 - 4.81 years
5 years
Expected average volatility
343%-402
%
288%-386
%
Expected dividend yield
-
-
Risk-free interest rate
0.16%-0.44
%
1.55%-2.24
%
The following table summarizes information relating to outstanding and exercisable warrants as of December 31, 2020:
Warrants Outstanding
Warrants Exercisable
Weighted Average
Number
Remaining Contractual
Weighted Average
Number
Weighted Average
of Shares
life (in years)
Exercise Price
of Shares
Exercise Price
5,438,166,666
4.66
$
0.0001
4,950,000,000
$
0.0001
Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the warrants at December 31, 2020 for those warrants for which the quoted market price was in excess of the exercise price (“in-the-money” warrants). As of December 31, 2020, the aggregate intrinsic value of warrants outstanding was approximately $990,000 based on the closing market price of $0.0003 on December 31, 2020.
The Company determined that the warrants qualify for derivative accounting as a result of the related issuance of the convertible note during the nine months ended December 31, 2020. As of December 31, 2020 and 2019, the Company valued the fair value on the 5,438,166,666 units and 969,833,333 units of common stock purchase warrants granted at $1,641,589 and $96,956 based on Black-Scholes option valuation model, respectively.
The Company had the following unsecured convertible notes payable as at December 31, 2020 and December 31, 2019:
December 31,
2020
December 31,
2019
Convertible Promissory Notes to Auctus Fund
$
476,258
$
357,324
Convertible Promissory Notes to EMA Financial
-
301,271
Convertible Promissory Notes to Tangiers
23,801
23,801
Convertible Promissory Notes to Denali
31,615
31,615
Total Convertible Debts
$
531,674
$
714,011
Promissory Notes Payable to Auctus Fund
Auctus #1
On May 20, 2016, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $67,750 with a $7,750 original issue discount. The convertible promissory note bears interest at 10% per annum and matures nine months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $60,000 is being amortized over the life of the note using the effective interest method resulting in $0 and $14,542 of interest expense for the year ended December 31, 2018 and December 31, 2017, respectively.
During the year ended December 31, 2017, principal of $15,278 and accrued interest of $5,975 were converted into111,460,000 shares of common stock.
During the year ended December 31, 2018, accrued interest of $2,494 were converted into 133,258,300 shares of common stock.
During the year ended December 31, 2019, principal of $40,241 and accrued interest of $1,153 were converted into 1,066,179,950 shares of common stock.
During the year ended December 31, 2020, accrued interest of $12,717 were converted into 317,919,774 shares of common stock.
As of December 31, 2020, the note is presented net of a debt discount of $5,011.
This note is currently in default.
Auctus #2
On September 20, 2016, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $56,750 with a $6,750 original issue discount. The convertible promissory note bears interest at 10% per annum and matures nine months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $50,000 is being amortized over the life of the note using the effective interest method resulting in $0 and $35,607 of interest expense for the year ended December 31, 2018 and year ended December 31, 2017, respectively.
On July 7, 2017, note amendment was executed with $20,000 increase in principal of the note and the note principal increased to $76,750. The Company received $20,000 cash proceeds from the note amendment on the same date.
As of December 31, 2020, the notes are presented net of a debt discount of $76,750.
On January 13, 2017, the Company entered into an agreement with Power Up Lending Group to issue a convertible promissory note of $45,000 with a $2,500 original issue discount to the unrelated party, which bears interest at 8% of the principal amount. The promissory note matures on January 13, 2018. The conversion price shall be equal to 57.5% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note. The note was discounted for a derivative and the discount of $45,000 is being amortized over the life of the note using the effective interest method. Total of $0 and $40,843 of the discount was recorded as interest expense for the year ended December 31, 2018 and the year ended December 31, 2017.
During the year ended December 31, 2017, principal of $6,700 was converted into 30,455,486 shares of common stock.
On June 14, 2017, the Company entered into an agreement with Power Up Lending Group to issue a convertible promissory note of $7,500 to the unrelated party, which bears interest at 12% of the principal amount. The promissory note matured on March 20, 2018. The conversion price shall be equal to 50% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note. The note was discounted for a derivative and the discount of $7,500 is being amortized over the life of the note using the effective interest method. Total of $0 and $4,462 of the discount was recorded as interest expense for the year ended December 31, 2018 and the year ended December 31, 2017.
On November 27, 2017, Auctus Fund, LLC entered into an agreement with Power Up Lending Group Ltd. to buy out the total outstanding principal amount and accrued interest of the two convertible promissory notes at $50,774.54. The note bears interest at 12% of the principal amount and matured on March 20, 2018. The conversion price shall be equal 57.5% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note. During the year ended December 31, 2018 and the year ended December 31, 2017, interest expense of $5,030 and $2,165 was recorded over the remaining note discount transferred the two convertible notes of $7,195.
As of December 31, the note is presented net of a debt discount of $50,745.
This note is currently in default.
Auctus #4
On November 2, 2017, the Company entered into an agreement to issue a convertible promissory note of $53,000 to the unrelated party, which bears interest at 12% of the principal amount. The promissory note matures on August 2, 2018. The conversion price shall be equal to 50% of the lowest trading price of the Company’s common stock during the 25 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note. The note was discounted for a derivative and the discount of $53,000 is being amortized over the life of the note using the effective interest method. Total of $41,546 and $11,454 of the discount was recorded as interest expense for the year ended December 31, 2018 and the year ended December 31, 2017. On February 23, 2018, EMA Financial LLC and Auctus Fund, LLC each made repayment to Crown Bridge Partners, LLC on behalf of the Company at $5,636.04 to settle the total outstanding principal and accrued penalty amount at $11,272.08 of the $40,000 convertible note. As a result, the principal amount of the $53,000 convertible note increased to $58,636.04.
As of December 31, 2020, the note is presented net of a debt discount of $58,636.
On March 7, 2018, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $30,000 with a $5,000 original issue discount. The convertible promissory note bears interest at 12% per annum and matures nine months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $30,000 is being amortized over the life of the note using the effective interest method resulting in $30,000 of interest expense for the year ended December 31, 2018.
As of December 31, 2020, the note is presented net of a debt discount of $30,000.
This note is currently in default.
Auctus #6
On July 9, 2018, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $43,500 with a $5,000 original issue discount. On July 25, 2018, the convertible promissory note was further amended with principal increased to $48,500. The convertible promissory note bears interest at 12% per annum and matures nine months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $48,500 is being amortized over the life of the note using the effective interest method resulting in $17,524 and $30,976 of interest expense for the year ended December 31, 2019 and the year ended December 31, 2018, respectively. In conjunction with the convertible note, the Company issued warrants to purchase 72,500,000 shares of common stock, exercisable for five years from issuance at $0.0003 per share.
As of December 31, 2020, the note is presented net of a debt discount of $48,500.
This note is currently in default.
Auctus #7
On March 22, 2019, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $62,500 with a $9,000 original issue discount. The convertible promissory note bears interest at 12% per annum and matures nine months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $62,500 is being amortized over the life of the note using the effective interest method resulting in $62,500 of interest expense for the year ended December 31, 2019. In conjunction with the convertible note, the Company issued warrants to purchase 209,000,000 shares of common stock, exercisable for five years from issuance at $0.0003 per share.
As of December 31, 2020, the note is presented net of a debt discount of $62,500.
This note is currently in default.
Auctus#8
On October 23, 2019, the Company entered into an agreement to issue a convertible promissory note of $100,000 to the unrelated party, which bears interest at 12% per annum and matures nine months from issue date. The conversion price shall be equal to the lesser of (i) 50% multiplied by the lowest Trading Price during the previous twenty-five Trading Day period ending on the latest complete Trading Day prior to the date of this Note and (ii) the Variable Conversion Price, that is 50% multiplied by the Market Price, being the lowest Trading Price for the Common Stock during the twenty-five Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. The note was discounted for a derivative and the discount of $100,000 is being amortized over the life of the note using the effective interest method resulting in $25,182 of interest expense for the year ended December 31, 2019. In conjunction with the convertible note, the Company issued warrants to purchase 50,000,000 shares of common stock, exercisable for five years from issuance at $0.0001 per share.
As of December 31, 2020, the note is presented net of a debt discount of $100,000.
On August 4, 2020, the Company entered into an agreement with Auctus Fund, LLC to issue a convertible promissory note of $31,000 to the unrelated party, which bears interest at 12% of the principal amount. The promissory note matures on August 4, 2021. The note is to be repaid by six equal payments commencing on the sixth month anniversary of issuance and due monthly thereafter. The conversion price shall be equal to the lesser of (i) the lowest Trading Price during the previous five trading date period ending on the latest completed trading Day prior to the date of this Note and (ii) Variable Conversion Price, that is Market Price being the volume weighted average price (VWAP) for the Common Stock during the five trading day period ending on the latest complete trading day prior to the conversion date. The note was discounted for a derivative and the discount of $31,000 is being amortized over the life of the note using the effective interest method. In conjunction with the convertible note, the Company issued warrants to purchase 206,666,666 shares of common stock, exercisable for five years from issuance at $0.0003 per share.
As of December 31, 2020, the note is presented net of a debt discount of $12,060.
Auctus#10
On November 2, 2020, the Company entered into an agreement with Auctus Fund, LLC to issue a convertible promissory note of $225,000 to the unrelated party, which bears interest at 12% of the principal amount. The promissory note matures on November 2, 2021. The note is to be repaid by six equal payments commencing on the sixth month anniversary of issuance and due monthly thereafter. The conversion price shall be equal to the lesser of (i) the lowest Trading Price and (ii) Variable Conversion Price, that is Market Price being the lowest trading price for the common stock during the one trading day period ending on the latest complete trading day prior to the conversion date. The note was discounted for a derivative and the discount of $225,000 is being amortized over the life of the note using the effective interest method. In conjunction with the convertible note, the Company issued warrants to purchase 2,225,000,000 shares of common stock, exercisable for five years from issuance at $0.0001 per share and returnable warrants to purchase 2,225,000,000 shares of common stock, exercisable for five years form issuance at $0.0001 per share which will be automatically expired in the event that the Company repays the convertible promissory notes prior to its maturity date.
As of December 31, 2020, the note is presented net of a debt discount of $32,055.
Promissory Note Payable to EMA Financial, LLC
During the year ended December 31, 2020, outstanding principal amount of $301,271 and accrued interest of $157,876 from all convertible notes issued to EMA Financial, LLC were fully repaid through $175,000. All the outstanding 188,333,333 units of common stock purchase warrants were fully redeemed.
EMA#1
On September 7, 2016, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $35,000 with a $5,250 original issue discount. The convertible promissory note bears interest at 10% per annum and matures twelve months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $29,750 is being amortized over the life of the note using the effective interest method resulting in $0 and $21,774 of interest expense for the year ended December 31, 2018 and the year ended December 31, 2017, respectively.
During the year ended December 31, 2017, principal of $7,538 were converted into 123,242,000 shares of common stock.
During the year ended December 31, 2018, principal of $905 were converted into 60,350,000 shares of common stock.
During the year ended December 31, 2020, outstanding principal amount of $47,521 and accrued interest of $40,967 were fully repaid through $175,000.
On November 3, 2016, the Company entered into an agreement with Blackbridge Capital Growth Funds, LLC to issue a convertible promissory note to an unrelated party for an amount of $60,000. The convertible promissory note bears interest at 8% per annum and matures on November 3, 2017. The conversion price is 50% of the lowest trading price 20 days prior to conversion. The note was discounted for a derivative and the discount of $60,000 is being amortized over the life of the note using the effective interest method resulting in $0 and $50,465 of interest expense for the year months ended December 31, 2018 and the year ended December 31, 2017, respectively.
During the year ended December 31, 2017, principal of $10,810 were converted into 65,000,000 shares of common stock.
On September 27 2017, EMA Financial, LLC entered into an agreement with Blackbridge Capital Growth Funds, LLC to buy out the outstanding principal amount and accrued interest of the convertible promissory note at $53,367.22. The note bears interest at 8% of the principal amount and matures on November 3, 2017. The conversion price shall be equal to 57.5% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note.
During the year ended December 31, 2020, outstanding principal amount of $49,190 and accrued interest of $25,460 were fully repaid through $175,000.
EMA#3
On October 31, 2017, the Company entered into an agreement to issue a convertible promissory note of $53,000 to the unrelated party, which bears interest at 12% of the principal amount. The promissory note matures on October 31, 2018. The conversion price shall be equal to 50% of the lowest trading price of the Company’s common stock during the 25 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note. The note was discounted for a derivative and the discount of $53,000 is being amortized over the life of the note using the effective interest method. Total of $44,142 and $8,858 of the discount was recorded as interest expense for the year ended December 31, 2018 and the year ended December 31, 2017, respectively.
On February 23, 2018, EMA Financial LLC and Auctus Fund, LLC each made repayment to Crown Bridge Partners, LLC on behalf of the Company at $5,636.04 to settle the total outstanding principal and accrued penalty amount at $11,272.08 of the $40,000 convertible note. As a result, the principal amount of the $53,000 convertible note increased to $58,636.04.
During the year ended December 31, 2020, outstanding principal amount of $58,636 and accrued interest of $35,778 were fully repaid through $175,000.
EMA#4
On March 5, 2018, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $30,000 with a $5,000 original issue discount. The convertible promissory note bears interest at 12% per annum and matures twelve months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $30,000 is being amortized over the life of the note using the effective interest method resulting in $5,260 and $24,740 of interest expense for the year ended December 31, 2019 and year ended December 31, 2018, respectively.
During the year ended December 31, 2019, principal of $2,826 were converted into 184,600,000 shares of common stock.
During the year ended December 31, 2020, outstanding principal amount of $27,174 and accrued interest of $14,379 were fully repaid through $175,000.
On August 9, 2018, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $43,500 with a $5,653 original issue discount. The convertible promissory note bears interest at 12% per annum and matures nine months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $43,500 is being amortized over the life of the note using the effective interest method resulting in $20,555 and $22,945 of interest expense for the year ended December 31, 2019 and the year ended December 31, 2018, respectively. In conjunction with the convertible note, the Company issued warrants to purchase 72,500,000 shares of common stock, exercisable for five years from issuance at $0.0003 per share.
During the year ended December 31, 2020, outstanding principal amount of $49,250 and accrued interest of $21,163 were fully repaid through $175,000. Outstanding 72,500,000 units of common stock purchase warrants were fully redeemed.
EMA#6
On March 25, 2019, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $69,500 with a $7,000 original issue discount. The convertible promissory note bears interest at 12% per annum and matures nine months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $69,500 is being amortized over the life of the note using the effective interest method resulting in $69,500 of interest expense for the year ended December 31, 2019. In conjunction with the convertible note, the Company issued warrants to purchase 115,833,333 shares of common stock, exercisable for five years from issuance at $0.0003 per share.
During the year ended December 31, 2020, outstanding principal amount of $69,500 and accrued interest of $20,130 were fully repaid through $175,000. Outstanding 115,833,333 units of common stock purchase warrants were fully redeemed.
Promissory Note Payable to Blackbridge Capital Growth Fund, LLC
Commitment Note
On November 3, 2016, the Company entered into an investment agreement with Blackridge Capital Growth Fund, LLC. Per the investment agreement, the investor will invest up to $2,000,000 to purchase the Company’s common stock, par value of $.001 per share.
The Company issued a convertible promissory note for $100,000, as a commitment fee, which bears interest at 8% of the principal amount and matures on November 3, 2017. The commitment fee expense of $100,000 was recognized on November 3, 2016. The conversion price is equal to 57.5% of the lowest trading price during the 20 days prior to the conversion.
On November 3, 2016, a derivative debt discount of $100,000 was recorded. For the year ended December 31, 2017, an amount of $100,000 was amortized into interest expense in relation to the debt discount.
On February 8, 2019, an agreement was reached between the Company and Blackbridge Capital Growth Fund, LLC for the termination of a securities purchase agreement between the two companies dated November 3, 2016 granting Blackbridge the rights to purchase up to $2 million of the Company’s common stock and cancellation of an 8% convertible promissory note in the original amount of $100,000 issued by the Company to Blackbridge pursuant to the securities purchase agreement as a commitment fee.
During the year ended December 31, 2019, the note principal amount of $100,000 was written off, resulting in other income of convertible note written off of $100,000.
On April 4, 2016, the Company entered into an investment agreement with an unrelated party. Per the investment agreement, the investor will invest up to $5,000,000 to purchase the Company’s common stock, par value of $0.001 per share. In connection with the investment agreement, the Company entered into a registration rights agreement with the unrelated party which has been filed with the SEC. The maximum investment amount is equal to one hundred percent of the average of the daily trading volume of the common stock for the ten days prior to the put notice entered into by the unrelated party. The total purchase price to be paid in connection with the put notice, is calculated at eighteen percent discount of the lowest trading price of the common stock during the five consecutive trading days immediately succeeding the put notice date.
The Company issued a promissory note to the unrelated party for $100,000, as a commitment fee, which bears interest at 10% of the principal amount and matures seven months from April 4, 2016 with a possible extension to ten months based on whether the Company executes the related investment agreement within 180 days from April 4, 2016. If the registration statement is declared effective within 90 days of the execution of the investment agreement, the Company and the unrelated party agree the principal balance of the note will be immediately reduced by $40,000. The note payable will be available to be converted upon default. Per the agreement, default could occur based on: failure of payment on any outstanding amounts longer than five days after the due date, failure to issue shares after request, or failure to comply with all of the other material provisions included in the agreement. The conversion price is equal to the lower of: (a) 90% of the lowest trading price of the Company’s common stock during the 25 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note, or (b) 90% of the lowest trading price of the Company’s common stock during the 25 consecutive trading days prior to the effective date of April 4, 2016. At the election of the unrelated party, at each closing date (as defined in the investment agreement) after the date which is six months after April 4, 2016, the unrelated party shall retain (or the Company shall pay to the unrelated party) an amount equal to ten percent of each Put Amount (as defined in the agreement), and the amounts shall be applied by the unrelated party as follows: first against the amount of any unpaid interest or other fees, and second against any unpaid principal amounts, until all interest, fees, and principal have been paid.
On April 28, 2016, the Company filed a registration statement with the Securities and Exchange Commission to register 3,500,000 shares of common stock pursuant to the Investment Agreement and the Registration Rights Agreement. On May 24, 2016, the Company received a comment letter from the Securities and Exchange Commission regarding the registration statement. On March 3, 2017, the Company voluntarily withdrew the registration statement.
The Company expensed the $100,000 as commitment fee during the year ended December 31, 2016.
The note was discounted for a derivative and the discount of $65,238 is fully amortized into interest expense for the year ended December 31, 2016.
On January 10, 2017, the Company entered into an Assignment Agreement that Denali acquired $50,000 of the $100,000 note held by Tangiers. As at January 10, 2017, $50,000 of principal remained with Tangiers.
During the year ended December 31, 2017, principal of $26,199 was converted for 49,905,893 shares of common stock.
As of December 31, 2020, the note is presented net of a debt discount of $23,801.
The note is currently in default.
Notes Payable to Denali
On January 10, 2017, the Company entered into an Assignment Agreement that Denali acquired $50,000 of the $100,000 note held by Tangiers.
During the year ended December 31, 2017, principal of $18,385 was converted for 9,884,409 shares of common stock.
As of December 31, 2020, the note principal balance was $31,615.
During the year ended December 31, 2020 and 2019, interest expense of $153,146 and $144,928 was incurred on convertible notes, respectively. During the year ended December 31, 2020, accrued interest of $157,876 was repaid. accrued interest of $21,860 was settled and accrued interest of $12,717 was converted to common shares. During the year ended December 31, 2019, accrued interest of $1,153 was converted to common shares. As of December 31, 2020 and December 31, 2019, accrued interest payable on convertible notes was $287,430 and $326,737, respectively.
Summary of Conversions
During the year ended December 31, 2020, the Company issued 317,919,774 shares of common stock for conversion of convertible note accrued interest of $12,717.
During the year ended December 31, 2019, the Company issued 1,250,779,950 shares of common stock for conversion of convertible note principal amount of $43,067 and accrued interest of $1,153.
NOTE 7 – DERIVATIVE LIABILITY
The Company analyzed the conversion options for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability when the conversion option becomes effective.
The following table summarizes the derivative liabilities included in the balance sheet at December 31, 2020:
Balance - December 31, 2019
$
3,068,168
Addition of new derivative liabilities upon issuance of convertible notes as debt discount
4,338
Reduction of derivative liabilities from repayment of convertible notes
(578,210
)
Reduction of derivative liabilities from redemption of warrants
(18,804
)
Addition of new derivative liabilities upon issuance of warrants as debt discount
211,762
Addition of new derivatives liabilities recognized as day one loss
413,129
Loss on change in fair value of the derivative
1,509,747
Balance - December 31, 2020
$
4,610,130
The following table summarizes the loss on derivative liability included in the income statement for the year ended December 31, 2020 and 2019, respectively.
Years Ended
December 31,
December 31,
2020
2019
Day one loss due to derivative liabilities on convertible notes
$
(159,280
)
$
(441,048
)
Day one loss due to derivative liabilities on warrants
(253,849
)
-
Loss on change in fair value of derivative liabilities on convertible notes and warrants
(1,509,747
)
(1,400,987
)
Loss on change in fair value of derivative liabilities
The table below shows the Black-Scholes option-pricing model inputs used by the Company to value the derivative liability at each measurement date:
Years Ended
December 31,
December 31,
2020
2019
Expected term
0.61 - 0.86 years
0.56 years
Expected average volatility
172% - 391
%
355% - 1099
%
Expected dividend yield
-
-
Risk-free interest rate
0.10% - 0.12
%
1.60% - 2.47
%
NOTE 8 – RELATED PARTY TRANSACTIONS
During the year ended December 31, 2020, the Company accrued $12,000 of salary payable to the Director of the Company and paid $30,600 owing to him for the accrued salaries.
During the year ended December 31, 2019, the Company accrued $120,000 of salary payable to the Director of the Company and paid $34,850 owing to him for the accrued salaries.
During the year ended December 31, 2020 and 2019, the Director of the Company advanced $0 and $1,750 for paying operating expenses on behalf of the Company, respectively.
As of December 31, 2020 and December 31, 2019, amount due to the related party was $388,668 and $301,018, respectively.
NOTE 9 – INCOME TAX
The Company provides for income taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
The components of the Company’s deferred tax asset and reconciliation of income taxes computed at the statutory rate to the income tax amount recorded as of December 31, 2020 and 2019, are as follows:
December 31,
2020
December 31,
2019
Net operating loss carryforward
$
2,700,062
$
2,415,163
Statutory tax Rate
21
%
21
%
Deferred tax asset
567,013
507,184
Less: Valuation allowance
(567,013
)
(507,184
)
Net deferred assets
$
-
$
-
As of December 31, 2020, the Company had approximately $2.7 million in net operating losses (“NOLs”) that may be available to offset future taxable income, which begin to expire between 2034 and 2037. NOLs generated in tax years prior to December 31, 2017, can be carryforward for twenty years, whereas NOLs generated after December 31, 2017 can be carryforward indefinitely. In accordance with Section 382 of the U.S. Internal Revenue Code, the usage of the Company’s net operating loss carry forwards is subject to annual limitations following greater than 50% ownership changes. Tax returns for the years ended 2014 through 2020 are subject to review by the tax authorities.
In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no retroactive material adverse impacts on the Company’s results of operations and financial position at December 31, 2020. The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on financial results and business operations of the Company in the future. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Annual Report on Form 10-K. These estimates may change, as new events occur and additional information is obtained.
NOTE 11 – SUBSEQUENT EVENTS
Subsequent to December 31, 2020 and through the date that these financials were made available, the Company had the following subsequent events:
Conversion of convertible notes and accrued interest to common stock
The Company issued 239,246,512 shares of common stock for conversion of convertible note principal amount of $3,746 and accrued interest of $5,824.
Exercise of warrants to common stock
The Company issued 195,483,870 shares of common stock from the exercise of 207,034,884 units of common stock purchase warrants.
Issuance of senior secured promissory note
On March 4, 2021, the Company entered into an agreement with Auctus Fund, LLC to issue a senior secured promissory note of $300,000 to the unrelated party, which bears interest at 12% of the principal amount. The promissory note matures on March 4, 2022. The note is to be repaid by six equal payments commencing on the sixth month anniversary of issuance and due monthly thereafter. In conjunction with the convertible note, the Company issued warrants to purchase 150,000,000 shares of common stock, exercisable for five years from issuance at $0.002 per share and returnable warrants to purchase 150,000,000 shares of common stock, exercisable for five years form issuance at $0.002 per share which will be automatically expired in the event that the Company repays the convertible promissory notes prior to its maturity date.
a) Evaluation of Disclosure Controls and Procedures
In connection with the preparation and filing of this Annual Report, we completed an evaluation of the effectiveness of our disclosure controls and procedures under the supervision and with the participation of our chief executive officer and chief financial officer. This evaluation was conducted pursuant to the Securities Exchange Act of 1934, as amended.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the framework set forth in the report Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013), or COSO (2013).
Based on the evaluation, management concluded that our disclosure controls and procedures were not effective as of December 31, 2020 due to the material weaknesses noted below in “Management’s Report on Internal Control over Financial Reporting”. A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected on a timely basis by employees in the normal course of their work.
b) Management's Report of Internal Control over Financial Reporting
As evidenced by the material weaknesses described below, we determined that entity-level controls related to the control environment did not operate effectively resulting in material weaknesses in such COSO (2013) component. The deficiencies in control environment each represent a separate material weakness. These material weaknesses contributed to an environment where there is a more than a remote likelihood that a material misstatement of the interim and annual financial statements could occur and not be prevented or detected.
During our assessment of the effectiveness of internal control over financial reporting as of December 31, 2020, management identified material weaknesses related to (i) the lack of any accounting personnel (ii) the lack of internal audit functions, (iii) the lack of segregation of duties, and (iv) the lack of proper internal control procedures and documentation. As of December 31, 2020, we had one executive, our chief executive and financial officer. As a result there was no segregation of duties.
A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
This annual report does not include an attestation report of our registered accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management's report in this annual report.
Because of the material weaknesses described above, management believes that, as of December 31, 2020, we did not maintain effective internal control over financial reporting based on the COSO (2013) criteria.
Management believes that the material weaknesses set forth above did not have an effect on our Company’s financial results.
c) Changes in Internal Control Over Financial Reporting.
As defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, there were no changes that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
The Board of Directors and Executive Officers of the Company
The following table and text sets forth the names and ages of all our directors and executive officers and our key management personnel as of the date hereof. All of our directors serve until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. Executive officers serve at the discretion of the Board of Directors.
Name
Age
Position
Shaun Donnelly
53
Chief Executive Officer, Chief Financial Officer and Director
Set forth below is a brief description of the background and business experience of our sole officer and director.
Shaun Donnelly, age 49, Chief Executive Officer, Director
Mr. Donnelly is an entertainment industry veteran who has created, produced and directed television series for such networks as Starz, AMI, ITV, Playboy TV, UKTV and YouToo. Mr. Donnelly served as LFC’s chief executive officer and sole director of LFC since its inception on July 21, 2014, and from April 2013 to July 2014, Mr. Donnelly operated a business similar to LFC's as a sole proprietorship, during which time he produced two events. Since 2005, Mr. Donnelly has served as the head of Canada’s Mind Engine Entertainment, where he has produced several feature films including the recently completed “Gone By Dawn.” Prior to getting into TV and film, Mr. Donnelly worked in the advertising industry where, in 1993, he founded Stormedia Communications, an Edmonton-based ad agency that specialized in oil and gas clients. He also published the literary digest Writer's Block Magazine for seven years and has worked as a writer and columnist for numerous magazines and newspapers. Mr. Donnelly attended Grant MacEwan University where he earned diplomas in Advertising & Public Relations and Audio Visual Communications. Mr. Donnelly does not believe that his duties with Mind Engine Entertainment will interfere with his duties as our chief executive officer.
Family Relationships
Since Mr. Donnelly is our sole officer and director, there are no family relationships between any of our officers or directors.
Compliance with Section 16(A) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).
Based solely on our review of certain reports filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, the reports required to be filed with respect to transactions in our common stock during the fiscal year ended December 31, 2020, were timely.
Board Committees
We have no audit, compensation or nominating committee. The functions of these committees are performed by our sole director. We do not have any independent directors.
Code of Ethics
We have not adopted a code of ethics as of the date of this report.
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
•
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
•
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
•
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
•
been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
•
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
•
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.
The following summary compensation table indicates the cash and non-cash compensation earned during the years ended December 31, 2020 and 2019 by each person who served as chief executive officer and chief financial officer during the year ended December 31, 2020.
SUMMARY COMPENSATION TABLE
Name and Principal Position
Year
Salary
($)
Bonus
($)
Stock
Awards ($)
Total
Shaun Donnelly, Chief Executive Officer,
2020
$
120,000
$
-
$
-
$
120,000
Chief Financial Officer and Director (1)
2019
$
120,000
--
$
--
$
120,000
____________
1.
Mr. Donnelly accrued compensation at the rate of $10,000 per month. On September 3, 2016, Mr. Donnelly was issued 51 Series A preferred shares valued at $42,669.
The Company entered into an employment agreement dated October 1, 2016 with Shaun Donnelly. Pursuant to the agreement, Mr. Donnelly will continue to be employed as Chief Executive Officer of the Company. The initial term of the Employment Agreement is for a period of twelve (12) months (the “Initial Term”).
During the Initial Term, the Company will pay Mr. Donnelly a monthly base compensation of $10,000. The base salary shall accrue each month when due to Mr. Donnelly pursuant to the terms as stated in the Employment Agreement, it being understood that the Company may refrain from making cash payment of the base salary to Mr. Donnelly for those months in which the Company does not have the cash and/or funds available to satisfy the base salary obligation to Mr. Donnelly. All amounts of base salary that remain unpaid but due and owing to Mr. Donnelly at the end of each calendar month shall accrue or may be converted into shares of the Company’s common stock.
Effective September 30, 2017, the Company and Mr. Donnelly entered into an amendment to the Employment Agreement. Pursuant to the terms of the amendment, the employment contact term is for a twelve month term, which term shall automatically renew yearly for an additional twelve (12) month term unless agreement is terminated in writing by Company within thirty (30) days of expiration of term. In addition, the amendment also adds the responsibility and duty of Chief Financial Officer to Mr. Donnelly.
Compensation of Directors
Currently, members of our Board of Directors receive no compensation.
The following table sets forth, as of May 28, 2021, certain information with respect to the beneficial ownership of our common stock by each shareholder known by us to be the beneficial owner of more than 5% of our Common Stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of Common Stock, except as otherwise indicated.
Under the rules of the Securities and Exchange Commission, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest.
Shares of Common Stock which an individual or group has a right to acquire within 60 days pursuant to the exercise or conversion of options are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table below.
Beneficial ownership is determined in accordance with Rule 13D-3(a) of the Exchange Act and generally includes voting or investment power with respect to securities.
(2)
The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse. Based on 2,773,832,045 share equivalents of common stock as of May 28, 2021.
(3)
Each one share of the Series A Preferred Stock has voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding shares of common stock of the Company eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (z) the Numerator. For purposes of illustration only, if the total issued and outstanding shares of common stock of the Company eligible to vote at the time of the respective vote is 5,000,000, the voting rights of one share of the Series A Preferred Stock shall be equal to 102,036 (0.019607 x 5,000,000) / 0.49) – (0.019607 x 5,000,000) = 102,036). The Series A Preferred Stock has no dividend rights, no liquidation rights and no redemption rights, and was created primarily to be able to obtain a quorum and conduct business at shareholder meetings.
The address for Mr. Donnelly is c/o Lingerie Fighting Championships, Inc., 6955 North Durango Drive, Suite 1115-129, Las Vegas 89149.
Changes in Control
We are not aware of any arrangements that may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.
None of our officers, directors, proposed director nominees, beneficial owners of more than 10% of our shares of common stock, or any relative or spouse of any of the foregoing persons, or any relative of such spouse who has the same house as such person or who is a director or officer of any parent or subsidiary of our Company, has any direct or indirect material interest in any transaction to which we are a party since our incorporation or in any proposed transaction to which we are proposed to be a party other than described below.
During the year ended December 31, 2020, the Company accrued $12,000 of salary payable to the Director of the Company and paid $30,600 owing to him for the accrued salaries.
During the year ended December 31, 2019, the Company accrued $120,000 of salary payable to the Director of the Company and paid $34,850 owing to him for the accrued salaries.
During the year ended December 31, 2020 and 2019, the Director of the Company advanced $nil and $1,750 for paying operating expenses on behalf of the Company, respectively.
Director Independence
Since our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship that, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
the director is, or at any time during the past three years was, an employee of the company;
•
the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
•
a family member of the director is, or at any time during the past three years was, an executive officer of the company;
•
the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
•
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
•
The director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.
•
Based upon the above criteria, we have no independent directors.
The following table sets forth the fees billed by our principal independent accountants for each of our last two fiscal years for the categories of services indicated.
Year Ended December 31,
Category
2020
2019
Audit Fees (1)
$
34,500
$
22,500
Audit Related Fees (2)
$
--
$
--
Tax Fees (3)
$
--
$
--
All Other Fees (4)
$
--
$
--
__________
(1)
Consists of fees billed for the audit of our annual financial statements, review of our Form 10-K and services that are normally provided by the accountant in connection with year-end statutory and regulatory filings or engagements.
(2)
Consists of fees billed for the review of our quarterly financial statements, review of our forms 10-Q and 8-K and services that are normally provided by the accountant in connection with non-year end statutory and regulatory filings on engagements.
(3)
Consists of professional services rendered by a company aligned with our principal accountant for tax compliance, tax advice and tax planning.
(4)
The services provided by our accountants within this category consisted of advice and other services relating to SEC matters, registration statement review, accounting issues and client conferences.
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 hereunto duly authorized.
LINGERIE FIGHTING CHAMPIONSHIPS, INC.
Date: June 7, 2021
By:
/s/ Shaun Donnelly
Shaun Donnelly
Chief Executive Officer and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated.
Officer (Principal Financial and Accounting Officer), and Director
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