Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Aug. 18, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | Elite Data Services, Inc. | |
Entity Central Index Key | 704,366 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer | No | |
Is Entity a Voluntary Filer | No | |
Is Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 25,595,902 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,015 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
CURRENT ASSETS: | ||
Cash | $ 131,909 | $ 659 |
Prepaid expense | 52,038 | 820,882 |
Total Current Assets | 183,947 | $ 821,541 |
OTHER ASSET: | ||
Deposit | 100,000 | |
Total Assets | 283,947 | $ 821,541 |
CURRENT LIABILITIES: | ||
Accounts payable and accrued liabilities | 386,752 | 606,221 |
Line of credit payable | 151,000 | 151,000 |
Loans from a related party | $ 167,257 | 139,029 |
Loan payable | 13,325 | |
Contingent consideration payable | $ 566,212 | |
Convertible note payable | $ 325,000 | |
Total Current Liabilities | 1,030,009 | $ 1,475,787 |
LONG TERM DEBT: | ||
Note payable, related party | 587,564 | 587,564 |
Total Liabilities | $ 1,617,573 | $ 2,063,351 |
STOCKHOLDERS' DEFICIT: | ||
Preferred stock, $0.0001 par value; 10,000,000 shares Series A authorized; issued and outstanding 0, respectively | ||
Common stock, $0.0001 par value; 50,000,000 shares authorized; issued and outstanding 25,493,402 and 19,219,070, respectively | $ 2,549 | $ 1,922 |
Additional paid-in capital | 9,414,956 | 7,581,444 |
Deficit accumulated | (10,751,131) | (8,825,176) |
Total Stockholders' Deficit | (1,333,626) | (1,241,810) |
Total Liabilities and Stockholders' Deficit | $ 283,947 | $ 821,541 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2015 | Dec. 31, 2014 |
Stockholders' Deficit | ||
Preferred stock Series A, par value | $ 0.0001 | $ 0.0001 |
Preferred stock Series A, Authorized | 10,000,000 | 10,000,000 |
Preferred stock Series A, Issued | 0 | 0 |
Preferred stock Series A, outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, Authorized | 50,000,000 | 50,000,000 |
Common stock, Issued | 25,493,402 | 19,219,070 |
Common stock, outstanding | 25,493,402 | 19,219,070 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Condensed Consolidated Statement Of Operations | ||||
REVENUES | $ 399 | $ 2,214 | $ 1,596 | $ 9,429 |
OPERATING EXPENSES | ||||
Consulting services | 54,794 | (5,700) | 59,794 | 32,500 |
Project development costs | 121 | $ 2,000 | 221 | $ 29,000 |
Investor relations services | 198,972 | 291,438 | ||
Warrants issued for services | 352,275 | 481,156 | ||
General and administrative | 37,283 | $ 40,444 | 80,204 | $ 80,614 |
Total Operating Expenses | 643,445 | 36,744 | 912,813 | 142,114 |
LOSS FROM OPERATIONS | (643,046) | $ (34,530) | (911,217) | (132,685) |
OTHER INCOME (EXPENSE): | ||||
(Loss) gain on extinguishment of debt | (107,816) | (959,272) | 115,247 | |
Interest expense - related party | (16,516) | $ (12,853) | (32,288) | (25,771) |
Interest expense - other | (6,912) | (5,662) | (23,179) | (11,325) |
Total Other Expense | (131,244) | (18,515) | (1,014,738) | 78,151 |
LOSS BEFORE PROVISION FOR INCOME TAXES | $ (774,290) | $ (53,045) | $ (1,925,955) | $ (54,534) |
PROVISION FOR INCOME TAX | ||||
NET LOSS | $ (774,290) | $ (53,045) | $ (1,925,955) | $ (54,534) |
Basic and Diluted Per Share Data: Net Loss Per Share - basic and diluted | $ (0.03) | $ .00 | $ (0.09) | $ .00 |
Weighted Average Common Shares Outstanding: Basic and diluted | 22,485,283 | 16,117,460 | 21,516,707 | 16,093,417 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
OPERATING ACTIVITIES: | ||
Net loss | $ (1,925,955) | $ (54,534) |
Adjustments to reconcile net loss to net cash used in opearting activities | ||
Loss (gain) on extinguishment of debt | 959,272 | $ (115,247) |
Stock compensation for investor relations services and consulting | 346,232 | |
Warrants issued for services | 481,156 | |
Changes in operating assets and liabilities: | ||
Prepaid expenses | (3,750) | |
Accounts payable and accrued expenses | (3,933) | $ 63,963 |
Net cash (used in) operating activities | (146,978) | $ (105,818) |
INVESTING ACTIVITY: | ||
Deposit | (100,000) | |
Net cash used in investing activity | (100,000) | |
FINANCING ACTIVITIES: | ||
Proceeds from stock sale | 25,000 | |
Proceeds from convertible promissory note | 325,000 | |
Payments to related party | (3,810) | |
Proceeds from related parties | 32,038 | $ 104,008 |
Net cash received from financing activities | 378,228 | 104,008 |
NET INCREASE (DECREASE) IN CASH | 131,250 | (1,810) |
CASH BEGINNING OF PERIOD | 659 | 2,884 |
CASH END OF PERIOD | $ 131,909 | $ 1,074 |
SUPPLEMENTAL DISCLOSURES: | ||
Cash paid for interest | ||
Cash paid for taxes | ||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Issuance of common stock in connection with the purchase of Classifiedride.com | $ 1,400 | |
Issuance of common stock in connection with the purchase of Autoglance, LLC | 77 | |
Issuance of common stock for conversion of debt | $ 1,754,344 | $ 115,362 |
Issuance of common stock for consulting services | $ 54,794 | |
Note payable for the purchase of classifiedride.com (See Note 4) | $ 587,564 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
NOTE 1 - DESCRIPTION OF BUSINESS | Elite Data Services, Inc. (hereinafter the Company, Our, We or Us) is a technology Company whose software applications are developed to market and advertise assets that the Company owns and controls. In addition to our automotive platforms, we have been focused on an expansion opportunity in the gaming sector on the island of Roatan, the largest of the bay islands of Honduras. On April 6, 2015, we entered into a contract to acquire a gaming distribution license for two cities on the Honduras mainland and Roatan. The Company is currently working on implementing gaming machines in Roatan in conjunction with its continued use of its existing technologies to generate revenue under its business plan. See Note 4, Note 9 and Note 11. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 2 - BASIS OF PRESENTATION | The accompanying unaudited condensed consolidated financial statements of Elite Data Services, Inc. (the "Company") are presented in accordance with the requirements for Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles. In the opinion of management, all adjustments (all of which were of a normal recurring nature) considered necessary to fairly present the financial position, results of operations, and cash flows of the Company on a consistent basis, have been made. The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in our annual 10-K filing, filed with the SEC on April 15, 2015. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2014 have been omitted. The consolidated balance sheet at December 31, 2014, has been derived from the audited financial statements included in the 2014 Annual Report. Going Concern The Company has accumulated a deficit of $10,751,131. The Company currently has only limited working capital with which to continue its operating activities. The amount of capital required to sustain operations is subject to future events and uncertainties. The Company must secure additional working capital through loans, sale of equity securities, or a combination, in order to implement its current business plans. There can be no assurance that such funding will be available in the future, or available on commercially reasonable terms favorable to the Company. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements have been presented on the basis of the continuation of the Company as a going concern and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Management continued to manage its costs for the six months ended June 30, 2015 to ensure appropriate funding is on hand for its continued operations through convertible debentures and financing from a related party. See Note 7 and 8. Managements plans include the raising of capital through the equity markets to fund future operations and pay debts and generating of revenue through our business. See Note 12. However, even if we do raise sufficient capital to support our operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable us to develop business to a level where we will generate profits and positive cash flows from operations. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Principles of Consolidation The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and include the accounts of the Company and its subsidiaries, Dynamic Energy Development Corporation and Transformation Consulting, Inc. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to intangible assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Reclassifications Certain reclassifications have been made in Statement of Operations for the year 2014 to the period ended June 30, 2015. These reclassifications impacted the classification of certain items within the Statement of Operations: relating to classification of interest expense. The reclassifications had no impact on previously reported total operating expenses, net loss, or stockholders' deficit. Impairment of Long-Lived Intangible Assets We review our long-lived assets, including intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment, if any, is measured as the excess of the carrying amount over the fair value based on market value (when available) or discounted expected cash flows of those assets, and is recorded in the period in which the determination is made. Intangible assets not subject to amortization are tested annually for impairment and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Development Costs Development costs are expensed in the period they are incurred unless they meet specific criteria related to technical, market and financial feasibility, as determined by management, including but not limited to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project. If all criteria are met, the costs are deferred and amortized over the expected useful life, or written off if a product is abandoned. For the six months ended June 30, 2015, the Company incurred no development costs. As of June 30, 2015, the Company had no deferred product development costs. Income Taxes Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted the accounting standards codified in ASC 740, Income Taxes as of its inception. Pursuant to those standards, the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not that it will utilize the net operating losses carried forward in future years. ASC 740-10-25 prescribes recognition thresholds that must be met before a tax position is recognized in the financial statements and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. An entity may only recognize or continue to recognize tax positions that meet a "more likely than not" threshold. Based on its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. The Company does not have any unrecognized tax benefits as of June 30, 2015 that, if recognized, would affect the Company's effective income tax rate. The Company's policy is to recognize interest and penalties related to income tax issues as components of income tax expense. The Company did not recognize or have any accrual for interest and penalties relating to income taxes as of June 30, 2015 and December 31, 2014. Cash Cash include all highly liquid instruments with an original maturity of three months or less at the date of purchase. The Company maintains its cash in cash deposit accounts, which are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per legal ownership. At times, the Companys accounts may exceed federally insured limits. To date, the Company has not experienced any losses in such accounts. At June 30, 2015, the Company had no cash equivalents. Fair Value of Financial Instruments The Companys financial instruments consist of cash, accounts payable, accrued liabilities, line of credit payable, loans from a related party, contingent consideration payable, and convertible note payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements. Fair Value Measurement The Company values its derivative instruments under FASB ASC 820 which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). The three levels of the fair value hierarchy are as follows: Level 1 Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities. Level 2 Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 3 Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in managements best estimate of fair value. The Company's financial instruments consisted of cash, prepaid expense, deposit, accounts payable and accrued liabilities, line of credit, loan from stockholders and convertible debt. The estimated fair value of cash, prepaid expense, deposit, accounts payable and accrued liabilities, line of credit, loan from stockholders approximates its carrying amount due to the short maturity of these instruments. The recognition of the derivative values of convertible debt are based on the weighted-average Black-Scholes option pricing model. Revenue Recognition The Company recognizes revenue in accordance with the FASB ASC Section 605-10-S99, Revenue Recognition, Overall, SEC Materials ("Section 605-10-S99"). Section 605-10-S99 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. Net Income (Loss) Per Common Share Basic loss per common share (EPS) is calculated by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The number of common shares that are exercisable or converted into common stock is not material to affect diluted EPS results. Further, since the Company shows losses for the periods presented basic and diluted loss per share are the same for all periods presented. Common Share Non-Monetary Consideration In situations where common shares are issued and the fair value of the goods or services received is not readily determinable, the fair value of the common shares is used to measure and record the transaction. The fair value of the common shares issued in exchange for the receipt of goods and services is based on the stock price as of the earliest of the date at which: i The counterpartys performance is complete; ii. commitment for performance by the counterparty to earn the common shares is reached; or iii. the common shares are issued if they are fully vested and non-forfeitable at that date. Stock-Based Compensation On December 1, 2005, the Company adopted the fair value recognition provisions codified in ASC 718, Compensation-Stock Compensation. The Company adopted those provisions using the modified-prospective-transition method. Under this method, compensation cost recognized for all periods prior to December 1, 2005 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of November 30, 2005, based on the grant-date fair value and b) compensation cost for all share-based payments granted subsequent to November 30, 2005, based on the grant-date fair value. In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital. The results for periods prior to December 1, 2005 were not restated. The Company accounts for equity instruments issued in exchange for the receipt of goods or services from parties other than employees in accordance with ASC 505, Equity. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the counterparty. Share Purchase Warrants The Company accounts for common share purchase warrants at fair value in accordance with ASC 815, Derivatives and Hedging. The Black-Scholes option pricing valuation method is used to determine fair value of these warrants. Use of this method requires that the Company make assumptions regarding stock volatility, dividend yields, expected term of the warrants and risk-free interest rates. Recently and Issued Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for transfer of promised goods or services to customers. ASU-2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The amendments in this update also require disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flow arising from contracts. ASU-2014-09 is effective for annual and interim reporting periods beginning after December 15, 2016, using one of two retrospective application methods. Early application is not permitted. The Company is currently evaluating the effect that the adoption of ASU 2014-09 will have on the Companys consolidated financial statements. In April 2015, the FASB issued amended guidance in a FASB ASU on, "Interest-Imputation of Interest", which simplifies the balance sheet presentation of debt issuance costs. Under the new guidance, debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction from the liability. This treatment is consistent with the presentation of debt discounts. The new guidance is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted, and the new guidance should be applied retrospectively. The adoption of this update on January 1, 2016 will not have a material impact on our consolidated financial statements. Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC during the current reporting period did not, or are not believed by management to have a material impact on the Companys present or future consolidated financial statements. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
NOTE 4 - RELATED PARTY TRANSACTIONS | Myers - LOC The principle amount due Sarah Myers (director and executive officer of the Company, the related party) at June 30, 2015 was $167,257, which represents an unsecured promissory note and addendums (Myers LOC). These amounts are unsecured and bear interest at the rate of 12% per annum. The Myers LOC has been amended to be due and payable on December 31, 2015. The accrued interest under the Myers LOC as of June 30, 2015 was $27,540. January 13, 2014 Agreement - ClassifiedRide On January 13, 2014, the Company entered into an asset purchase agreement with Baker Myers and Associates, LLC (Baker Myers) to acquire certain assets including, www.classifiedride.com, an online classified listing website whereprivate sellers can buy, sell, and trade their vehicle. Ms. Myers is the managing member and sole owner of Baker Myers, and also serves as an Officer and Director of the Company. As of June 30, 2014, pursuant to GAAP ASC 805-50-30, the carrying value of the assets was recorded to the transaction being made by a related party as $587,564 and a convertible note was amended and issued in the amount of $587,564 with an interest rate of 8% per annum. At June 30, 2015, the note balance and accrued interest was $587,564 and $67,512, respectively. January 15, 2014 Agreement Autoglance On January 15, 2014, the Company entered into an Agreement with Baker Myers for 51% of the membership interest of Autoglance, LLC, a Tennessee Limited Liability Company, and with it majority control over all owned assets of Autoglance, LLC, including the website www.autoglance.com (collectively Autoglance) for 765,000 shares the Companys common stock as consideration. Separation and Settlement Agreement with Steven Frye On June 15, 2015, the Company entered into a Separation and Settlement Agreement Release of Claims (the Agreement) with Steven Frye, our former Chief Executive Officer, Chief Financial Officer, and President. According to the Agreement, the Company agreed to pay Mr. Frye $54,794 for services rendered in the form of 391,386 shares of Common Stock of the Company valued at $.14 per share on the date of the Agreement. The Agreement further stated Mr. Frye would be responsible for all taxes, and Mr. Frye signed a general release of any and all claims, known or unknown, against the Company. On July 1, 2015, Mr. Frye delivered his executed paperwork to the Company. |
CONTINGENT CONSIDERATION PAYABL
CONTINGENT CONSIDERATION PAYABLE | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
NOTE 5 - CONTINGENT CONSIDERATION PAYABLE | On February 25, 2011, the Companys wholly owned subsidiary, Dynamic Energy Alliance Corporation (hereafter DEDC) and a former director no longer associated with the Company (hereafter the Director) entered into a Stock Purchase Agreement (hereafter Agreement) and corresponding Amendments No. 1, No. 2 and No. 3, dated December 30, 2011, March 31, 2012 and September 26, 2012, respectively, by which DEDC acquired all of the outstanding shares of Transformation Consulting, Inc. (hereafter TC). The purchase price for the shares was $2,000,000, payable from the gross revenues of TC, subject to the following contingent reduction or increase of the purchase price. Pursuant to the Agreement, if TCs gross revenues during the two years following the closing were less than $2,000,000, then the purchase price for the shares would be reduced to the actual revenue received by TC during the two year period. If TCs revenues during the same two year period exceed $2,000,000, then the purchase price for the shares would be increased by one-half of the excess revenues over $2,000,000 (hereafter contingent consideration). Pursuant to the contingent consideration of $2,000,000 due to the Director from TC, all revenues generated by TC under the Agency Agreement were disbursed to the former Director. Through December 31, 2012, gross revenues under the TC Stock Purchase Agreement totaled approximately $2,000,000.Through December 31, 2013, payments, net of refunds, made to Director under the TC Stock Purchase Agreement totaled $984,638. On September 30, 2013, the former director assigned the remaining contingent consideration debt note (hereafter the Note) to Habanero Properties via an Assignment and Assumption Agreement. The Note was subsequently offset by $108,788 as payment for warrants exercised at their strike price by the former director. Habanero Properties subsequently assigned the remaining contingent consideration due and payable to Rocky Road Capital, Inc. For the period ended June 30, 2015, the Company eliminated the remaining balance due and payable by entering into five Assignment of Convertible Promissory Note and Consent and a Convertible Promissory Note totaling $322,012 with third parties not affiliated with the Company. Each agreement specified the amount of the assignment to be paid back at $.10 per share for the conversion of 3,220,120 Shares of the Companys Common Stock. None of the assignments amounted to any of the Assignees owing more than 4.99% of the outstanding securities of the Company. The estimated fair value of the common shares was used to measure and record the transaction with the difference between the conversion prices and estimated fair value being recorded as loss on extinguishment of debt. For the period ended, June 30, 2015, the Company recognized a loss of $107,816 on extinguishment of debt as a result of the transactions. At June 30, 2015 and December 31, 2014, the contingent consideration payable is as follows: As of June 30, As of December 31, Contingent consideration due 2015 2014 Contingent consideration due $ 2,000,000 $ 2,000,000 Less payments, net of refunds, to Director (984,638 ) (984,638 ) Payment of exercise of warrants (108,788 ) (108,788 ) Conversion of contingent consideration to common stock (906,574 ) (340,362 ) $ 0 $ 566,212 |
LOAN PAYABLE _ RELATED PARTY
LOAN PAYABLE – RELATED PARTY | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
NOTE 6 - LOAN PAYABLE – RELATED PARTY | On April 14, 2014, the Company entered into a Promissory Note dated April 15, 2014 (the Note) with Stephen Frye, former Chief Executive Officer, President, CFO, and Director of the Company, for $13,500 with interest accruing at the rate of 12% per annum with an extended due date of December 31, 2015 (Addendum One). On June 15, 2015, the Company entered into Addendum Two (Addendum Two), which allowed the conversion of $15,207 (the principal and outstanding interest due under the Note) payable in Common Stock of the Company with the price per share being the closing price of the Companys stock as of the date of the Agreement. The fair value of the closing stock price was calculated, as of June 15, 2015, at $0.14, whereby the Note and accrued interest was converted into 108,614 shares of Restricted Common Stock of the Company. As of June 30, 2015, loan payable to related party is $0. |
COMMITMENTS AND CONTRACTUAL OBL
COMMITMENTS AND CONTRACTUAL OBLIGATIONS | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
NOTE 7 - COMMITMENTS AND CONTRACTUAL OBLIGATIONS | Loans Payable Related Party The amounts due to a related party at June 30, 2015 of $167,257, represents the Myers LOC. These amounts are unsecured and bear interest at 12% per annum. At June 30, 2015, accrued interest was $27,540. Line of Credit Payable On August 16, 2013, Birch First Capital Fund, LLC and/or Birch First Capital Management, LLC (Birch First) filed a complaint against the Company in the 15th Judicial Circuit of Florida (2013 CA 012838) alleging breach of contract under a Line of Credit Agreement (LOC) totaling $151,000. On November 18, 2013, Birch First brought a lawsuit in the 15th Judicial Circuit of Florida against Mr. Charles Cronin and Dr. Earl Beaver (former officers and directors of the Company), naming the Company as a nominal defendant. A motion to dismiss was filed by the Company concerning this derivative lawsuit, which is still currently pending. As of June 30, 2015, the Company and Birch First (collectively the Parties) were still in negotiations to settlement terms, and on July 23, 2015 the Parties finalized the settlement agreements which lead to the conclusion of Case 2013 CA 012838. See Note 12. At June 30, 2015, the disputed liability including accrued interest under the LOC, was $212,794. The principle balance of the LOC of $151,000 is classified as a line of credit payable and the related accrued interest at June 30, 2015, of $61,794 is classified in accrued liabilities. Stock Compensation for investor relations services On December 3, 2014, the Company entered into an Investor Relations Consulting Agreement (the Agreement) with EraStar Inc. (EraStar). Under the terms of the Agreement, the Company had the ability to challenge performance under the contract to an independent referee within certain timelines, which the Company initiated on January 21, 2015 (the Termination Date). As a result of the ruling in favor of the Company by the independent referee, the entire Agreement was cancelled. As of June 30, 2015, the Company had not reached EraStar due to the management problems following the passing of EraStars Chairman. For the six month period ended June 30, 2015, the Company expensed $772,594 of warrant expense and stock based compensation for investor relations services, and $40,000 is accrued in accrued liabilities. |
CONVERTIBLE PROMISSORY NOTE
CONVERTIBLE PROMISSORY NOTE | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
NOTE 8 - CONVERTIBLE PROMISSORY NOTE | Convertible Note with Iconic Holdings, LLC On March 16, 2015 (the Effective Date), the Company entered into a $120,000 Convertible Note with Iconic Holdings, LLC (Iconic) with a Maturity Date of March 16, 2016. Under the terms of the Convertible Note, the Company received net proceeds of $100,000 with $10,000 being retained under an Original Issuance Discount (OID) and $10,000 having been paid to Iconic as legal fees pertaining to the transaction. The convertible debenture bears a one-time interest charge of 10% assessed on the outstanding principal not repaid as of the 181th day from the effective date. Beginning on the 181th day from the Effective Date, the Company must seek permission from Iconic to repay the outstanding balance of the Note, and Iconic will have the right to convert any unpaid sums into common stock of the Company equal to 60% of the lowest trading price of the Companys common stock during the 20 consecutive trading days prior to the conversion. The balance outstanding at June 30, 2015 was $120,000. See Note 12. Convertible Note with JSJ Investments Inc. On June 11, 2015 the Company issued a 12% Convertible Note (the JSJ Note) to JSJ Investments, Inc (JSJ) in the principal amount of $100,000 (net $88,000 to the Company after payment of related legal and broker fees). The JSJ Note bears interest at the rate of 12% per annum, and is due December 11, 2015 (the Maturity Date). The JSJ Note has a redemption premium of 135% of the Principal if repaid within 90 and 120 days, which increases to a redemption premium of 145% if after the 120th day (the "Repayment Amount"). The Company must request permission from JSJ to pay the JSJ Note after the 120 th The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging Derivatives and Hedging Convertible Note with LG Capital Funding, LLC On June 16, 2015, the Company and LG Capital Funding, LLC (LG) entered into a Securities Purchase Agreement under which we issued a convertible note in the principal amount of $52,500 (the "LG Note") due June 16, 2016 bearing interest at the rate of 6% per annum. After broker and legal fees, the Company netted $45,000. The LG Note is due and payable on June 16, 2016, with interest payable in shares of common stock. If the Company fails to repay the LG Note when due, or if other Events of Default thereunder apply, a default interest rate of 24% per annum will apply along with other breach provisions and related penalties contained in the note. The LG Note is convertible into shares of our common stock at a conversion price equal to 58% of the lowest closing bid price of our common stock for the ten trading days on or prior to the date upon which notice of conversion is received, subject to reduction to 48% if there is DTC Chill placed on our shares of common stock. The Company may prepay in full the unpaid principal and interest on the LG Capital Convertible Note, upon notice, any time prior to the 180th day after the issuance date. Any prepayment is subject to payment of a prepayment amount ranging from 115% to 140% of the then outstanding balance on the LG Note (inclusive of accrued and unpaid interest and any default amounts then owing), depending on when such prepayment is made. Additionally, upon the occurrence of certain fundamental events as described in the LG Note, we are required to repay the LG Note at the request of the holder in an amount equal to 150% of the then balance. Further, such redemption must be closed and funded within three days of giving notice of redemption or the right to redeem shall be null and void. As of June 30, 2015, the outstanding balance of the note was $52,500 and accrued interest was $129. The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging Derivatives and Hedging Convertible Note with Adar Bays, LLC On June 16, 2015, the Company and Adar Bays, LLC (Adar) entered into a Securities Purchase Agreement under which we issued a convertible note in the principal amount of $52,500 (the "Adar Note") due June 16, 2016 bearing interest at the rate of 6% per annum. After broker and legal fees, the Company netted $45,000. The Adar Note is due and payable on June 16, 2016, with interest payable in shares of common stock. If the Company fails to repay the Adar Note when due, or if other Events of Default thereunder apply, a default interest rate of 24% per annum will apply along with other breach provisions and related penalties contained in the note. The Adar Note is convertible into shares of our common stock at a conversion price equal to 58% of the lowest closing bid price of our common stock for the ten trading days on or prior to the date upon which notice of conversion is received, subject to reduction to 48% if there is DTC Chill placed on our shares of common stock. The Company may prepay in full the unpaid principal and interest on the Adar Note, upon notice, any time prior to the 180th day after the issuance date. Any prepayment is subject to payment of a prepayment amount ranging from 115% to 140% of the then outstanding balance on the Adar Note (inclusive of accrued and unpaid interest and any default amounts then owing), depending on when such prepayment is made. Additionally, upon the occurrence of certain fundamental events as described in the Adar Note, we are required to repay the note at the request of the holder in an amount equal to 150% of the then balance of the note. Further, such redemption must be closed and funded within three days of giving notice of redemption or the right to redeem shall be null and void. As of June 30, 2015, the outstanding balance of the note was $52,500 and accrued interest was $129. The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging Derivatives and Hedging |
DEPOSIT FOR PURCHASE OF LICENSE
DEPOSIT FOR PURCHASE OF LICENSE | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
NOTE 9 - DEPOSIT FOR PURCHASE OF LICENSE | As of April 4, 2015, the Company instructed its escrow agent to deliver $100,000 as a deposit in good faith pursuant to the Security Purchase Agreement dated April 4, 2015 (the SPA) and Promissory Note dated April 6, 2015 (the Note) to acquire all of the capital stock of El Mar Muerto Beauty Mineral, Sociedad Anonima (hereafter EMBM) a Honduras corporation, whose sole assets consist of a Honduras gaming license, which permits the operation of Eighty (80) gaming machines in Trujillo, Eighty (80) gaming machines in La Lima, and One Hundred and Sixty (160) gaming machines in Roatan, the largest of Hondurass bay islands, for a total purchase price of $10,000,000. On June 30, 2015, the Company amended the Note and SPA to reflect a due date of April 6, 2016 in conjunction with the first payment of Nine Hundred Thousand Dollars ($900,000), which is due in either cash, stock, or 25% of the net revenues of EMBMs operations at the sellers option, and the current purchase price owed was reduced to $9,900,000, which deducts the $100,000 deposit tendered on April 4, 2015 as referenced herein. The Company will record the asset and liability in accordance with generally accepted accounting principles upon the effective date of the amended SPA and Note. See Note 11. |
CAPITAL STOCK
CAPITAL STOCK | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
NOTE 10 - CAPITAL STOCK | Authorized The Company is authorized to issue 10,000,000 shares of preferred stock, having a par value of $0.0001 per share, and 50,000,000 shares of common stock, having a par value of $0.0001 per share. Issued and Outstanding Preferred Stock At June 30, 2015, the Company there are no shares of preferred stock outstanding. Common Stock At June 30, 2015, shares of common stock issued and outstanding totaled 25,493,402. During the six months ended June 30, 2015, the Company issued 6,274,332 shares of common stock as follows: On January 8, 2015, the Company sold 25,000 shares of Common Stock and received net proceeds of $25,000. On January 30, 2015, the Company entered into shares for liability settlement with a creditor wherein an aggregate of $88,431 of debt was settled by the aggregate issuance of 87,212 shares of common stock. The estimated fair value of the common shares was used to measure and record the transaction with the difference between the conversion prices and estimated fair value being recorded as gain on extinguishment of debt aggregating $44,825. On February 4, 2015, the Company entered into a note conversion agreement with Rocky Road Capital, Inc. to convert $94,200 of the principal balance, which was due to a former director and subsequently assigned to Rocky Road Capital, Inc., into 942,000 shares of Common Stock (at $0.10 per share), thereby reducing the balance owed under the note to $472,012. The estimated fair value of the common shares was used to measure and record the transaction with the difference between the conversion prices and estimated fair value being recorded as loss on extinguishment of debt aggregating $376,800. On February 20, 2015, the Company entered into a note conversion agreement with Rocky Road Capital Inc. to convert $150,000 of the principal balance, which was due to a former director and subsequently assigned to Rocky Road capital, Inc., into 1,500,000 shares of Common Stock (at $.10 per share), thereby reducing the balance owed under the note to $322,012. The estimated fair value of the common shares was used to measure and record the transaction with the difference between the conversion prices and estimated fair value being recorded as loss on extinguishment of debt aggregating $600,000. On June 12, 2015 and June 15, 2015, the Company entered into note conversions pursuant to the Rocky Road note totaling $322,012 at $.10 per share for the conversion of 3,220,120 Shares of the Companys Common Stock, thereby eliminating the entire balance owed. Rocky Road Capital Inc. The estimated fair value of the common shares was used to measure and record the transaction with the difference between the conversion prices and estimated fair value being recorded as loss on extinguishment of debt aggregating $152,520. On June 15, 2015, the Company entered into a Separation and Settlement Agreement Release of Claims (the Settlement Agreement) with Steven Frye, our former Chief Executive Officer, Chief Financial Officer, and President. According to the Settlement Agreement, the Company agreed to pay Mr. Frye $54,794 for services rendered in the form of 391,386 shares of Common Stock of the Company closing price of the Companys stock as of June 15, 2015 ($.14 per share). The Settlement Agreement further stated Mr. Frye would be responsible for all taxes and signed a general release of any and all claims, known or unknown, against the Company. On July 1, 2015, Mr. Frye delivered his executed paperwork to the Company. On June 15, 2015, the Company entered into Addendum Two (Addendum Two) of the Promissory Note dated April 15, 2014 (the Note) between the Company and Steven Frye. The Promissory Note dated April 15, 2015 was for the principle amount of $13,500 with 12% accrued interest. As of June 15, 2015, the principal and interest totaled $15,206 and was converted into 108,614 shares of Common Stock of the Company at the fair value of the closing stock price calculated as of June 15, 2015 ($0.14). On July 1, 2015, Mr. Frye delivered his executed paperwork to the Company. Warrants Issued for Services The Company issued no warrants in the six months ending June 30, 2015, and there were 2,307 warrants outstanding with a weighted average exercise price of $260 at June 30, 2015. The following table summarizes the warrant activity for the six months ended June 30, 2015: Warrants Outstanding Weighted Average Number of Exercise Shares Price Balance, December 31, 2014 1,002,307 $ 259 Granted $ Exercised Expired/Cancelled (1,000,000 ) (2 ) Balance, June 30, 2015 2,307 $ 260 Exercisable at June 30, 2015 2,307 $ 260 The range of exercise prices and the weighted average exercise price and remaining weighted average life of the warrants outstanding at June 30, 2015 were $130 to 390.00, $260 and .51 years, respectively. The aggregate intrinsic value of the outstanding warrants at June 30, 2015 was $0. |
PURCHASE OF THE GAMING LICENSE
PURCHASE OF THE GAMING LICENSE | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
NOTE 11 - PURCHASE OF THE GAMING LICENSE | On April 4, 2015, the Company entered into a Securities Purchase Agreement (the Agreement) and Promissory Note (the Note) with H y H Investments, S.A. (the Seller) for the purchase of all outstanding securities of El Muerto Beauty Mineral, Sociedad Anonima (hereafter EMBM) whose sole asset consists of a license to operate 80 gaming machines in two cities on the Honduras mainland and 160 gaming machines in Roatan, the largest of the bay islands of Honduras. The total purchase price for the license was Ten Million Dollars ($10,000,000) payable in the form of a Promissory Note (the Note). Upon the signing of the Agreement and Note, the $100,000 funds in escrow were paid to the Seller under the terms of the Note. The Company owes no further obligation under the terms of the Note until April 6, 2016, at which time $900,000 is due to the Seller, payable in the form of cash or shares of common stock of the Company. If the Seller elects to convert such payment or a portion of such payment into shares, the value of the shares will be assessed as the average closing price of the common stock of the Company for the five trading days immediately preceding April 6, 2016. The remaining balance under the Note is payable up to $2,500,000 per year thereafter through March 31, 2021 by either cash payments or by a revenue-share of 25% of the net revenues received by EMBM during such time period. In the event that Seller has not received the full amount due on or before March 31, 2021, such amount due may be payable via the issuance of the Companys shares of common stock at the average closing price of the Companys common stock for the five trading days immediately preceding March 31, 2021. Beginning on or after April 17, 2017, payments tendered in the Companys common stock may be repurchased by the Company given the Sellers approval. The Seller agreed to waive interest payments of 3.85% per annum, due in monthly installments, in exchange for a sub-license granting the Seller usage of twenty-five (25) machines in the municipality of Roatan. On June 30, 2015, the Company amended the Note and SPA to reflect a due date of April 6, 2016 in conjunction with the first payment of Nine Hundred Thousand Dollars ($900,000), which is due in either cash, stock, or 25% of the net revenues of EMBMs operations. The Note was also amended to reflect the current purchase price owed was reduced to $9,900,000, which deducts the $100,000 non-refundable deposit tendered on April 6, 2015. See Note 9. The Company will record the asset and liability in accordance with generally accepted accounting principles upon the effective date of the amended SPA and Note. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
NOTE 12 - SUBSEQUENT EVENTS | 2,500 Common Shares Issued to Shareholder On July 27, 2014, the Company issued 2,500 restricted shares via a notice of issuance of stock to an individual for his preparation and assistance in the Companys preparation of financial statements for the year ended December 31, 2013. Summary of Transactions with Tarpon Bay Partners, LLC On July 14, 2015, we entered into an Equity Purchase Agreement (the "Purchase Agreement" or Equity Line) and Registration Rights Agreement (the Registration Agreement) with Tarpon Bay Partners LLC (Tarpon) whereby Tarpon is obligated, providing the Company has met certain conditions, including the filing of a Form S-1 Registration Statement for the shares to be acquired, to purchase up to $5,000,000 of the Companys common stock at the rates set forth in the Purchase Agreement. In conjunction with the Equity Line, the Company issued a promissory note to Tarpon for $50,000, due on January 31, 2016, with 10% interest per annum as consideration for transaction costs incurred by Tarpon. The $50,000 of transaction costs will be treated as a reduction in additional paid-in capital since the transaction costs relate to equity financing. The Purchase Agreement has a term of two-years (the "term") and may be terminated sooner by the Company or if Tarpon has purchased a total of $5,000,000 of the Company's common stock before the expiration of the term. During the term of the Purchase Agreement, the Company may at any time deliver a "Put Notice" to Tarpon thereby requiring Tarpon to purchase a certain dollar amount (the "Investment Amount") in exchange for a portion of the Shares (the "Put"), determined by an estimated amount of Shares equal to the investment amount indicated in the Put Notice divided by the closing bid price of the Company's common stock on the trading day (the "Closing Price") immediately preceding the date the Put Notice was given (the "Put Date"), multiplied by one hundred twenty-five percent (125%) (the "Estimated Put Shares"). On the trading date preceding the delivery date of such Shares, Tarpon shall deliver payment for the Shares equal to the Company's requested Investment Amount. Subject to certain restrictions, the purchase price for the Shares is equal to ninety percent (90%) of the lowest closing bid price, quoted by the exchange or principal market Company's Common Stock is traded on, on any trading day during the ten (10) trading days immediately after the date the Company delivers to Tarpon a Put Notice in writing requiring Tarpon (the "Valuation Period") to purchase the applicable number of Shares of the Company, subject to certain terms and conditions of the Purchase Agreement. In the event the number of Estimated Put Shares initially delivered to Tarpon is greater than the Put Shares purchased by Tarpon pursuant to such Put Notice, then immediately after the Valuation Period Tarpon shall deliver to the Company any excess Estimated Put Shares associated with such Put Notice. If the number of Estimated Put Shares delivered to Tarpon is less than the Put Shares purchased by Tarpon pursuant to a Put Notice, then immediately after the Valuation Period the Company shall deliver to Tarpon the difference between the Estimated Put Shares and the Put Shares issuable pursuant to such Put Notice. The number of Shares sold to Tarpon shall not exceed the number of such Shares that, when aggregated with all other shares of common stock of the Company then beneficially owned by Tarpon, would result in Tarpon owning more than 9.99% of all of the Company's common stock then outstanding. Additionally, Tarpon may not execute any short sales of the Company's common stock. Further, the Company has the right, but never the obligation to draw down on the total of $5,000,000. The Purchase Agreement also contains other customary and standard provisions. Co nvertible Note to EMA Financial, LLC On July 14, 2015, (the "Note Issuance Date"), the Company entered into a Securities Purchase Agreement (the "SPA") with EMA Financial, LLC ("EMA"), whereby EMA agreed to invest $156,500 (the "Note Purchase Price") in our Company in exchange for a convertible promissory note (the "Note"). The Company netted $135,000 after brokerage and legal fees. Additionally, the Company is required to issue to EMA 100,000 shares of Common Stock of the Company within three days following the closing date as a loan fee. Pursuant to the SPA, on July 14, 2015, we issued a convertible promissory note (the "Note") to EMA, in the original principal amount of $156,500 (the "Note Purchase Price"), which bears interest at 12% per annum. All outstanding principal and accrued interest on the Note is due and payable on the maturity date, which is July 14, 2016 (the "Note Maturity Date"). EMA may extend the Note Maturity Date by providing us with written notice at least five days before the Note Maturity Date. However, EMA may only extend the Note Maturity Date for up to an additional one-year period. Any amount of principal or interest that is due under the Note, which is not paid by the Note Maturity Date, will bear interest at the rate of 24% per annum until it is paid (the "Note Default Interest"). The Note is convertible by EMA into shares of our common stock at any time ending on the date which is six (6) months following the Issue Date ("Prepayment Termination Date"). At any time before the Prepayment Termination Date, the Company shall have the right, exercisable on not less than five (5) Trading Days prior written notice to EMA of this Note, to prepay the outstanding balance on this Note (principal and accrued interest), in full. The conversion price is the lower of: (i) the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately preceding the Closing Date, and (ii) 60% of the lowest sale price for the Common Stock on the Principal Market during the 20 consecutive Trading Days immediately preceding the Conversion Date. EMA does not have the right to convert the Note into Common Stock if such conversion would result in EMA's beneficial ownership exceeding 4.9% of our outstanding Common Stock at that time. We agreed to reserve an initial 8,000,000 shares of Common Stock for conversions under the Note (the "Initial Reserve"). We also agreed to adjust the Initial Reserve to ensure that it always equals at least four times the total number of Common Stock that is actually issuable if the entire Note is converted. EMA's rights under the Note will generally remain protected, and our obligations under the Note will be assumed by any successor or acquiring entity if applicable, if we effectuate a merger, consolidation, exchange of shares, recapitalization, reorganization, or other comparable event in which our outstanding Common Stock changes into a different amount or class, or if we sell or transfer all or substantially all of our assets (each a "Material Event"). We agreed to give at least 15 days prior written notice to EMA before a special meeting of our shareholders regarding a Material Event, or if no meeting is applicable, our closing of the Material Event. In the event that we issue securities, or rights to purchase securities, on a pro rata basis to our Common Stock shareholders (the "Purchase Rights"), we agreed to calculate EMA's pro rata portion under the Purchase Rights as if EMA had fully converted the Note immediately before we offered the Purchase Rights. All amounts due under the Note become immediately due and payable by us upon the occurrence of an event of default, including but not limited to (i) our sale of all or substantially all of our assets, (ii) our failure to pay the amounts due at maturity, (iii) our failure to issue shares of Common Stock upon any conversion of the Note, (iv) our breach of the covenants, representations or warranties under the Note, (v) our appointment of a trustee, (vi) a judgment against us in excess of $50,000 (subject to a 20 day cure period), (vii) our liquidation, (viii) the filing of a bankruptcy petition by us or against us, (ix) our failure to remain current in our reporting obligations under the Securities Exchange Act of 1934, (x) the delisting of our Common Stock from the OTCQB or equivalent exchange, (xi) a restatement of our financial statements for any period from two years prior to the Note Issuance Date until the Note has been paid in full, or (xi) our effectuation of a reverse stock split without 20 days prior written notice to EMA. We are required to pay the Default Sum, which is defined in the Note, depending on the event of default that has occurred. The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging Derivatives and Hedging Settlement Agreement with Birch First Capital Fund, LLC and Birch First Advisors LLC On July 23, 2015, the Company and Birch First Capital Fund LLC (Birch First Capital), a Delaware limited liability company and Birch First Advisors LLC, a Delaware limited liability company (Birch Advisors), executed a Settlement and Stipulation Agreement (the Settlement Agreement) dated July 21, 2015, pursuant to which the parties agreed to fully resolve and dismiss, with no liability admitted or deemed to be admitted by any party, any and all claims that have been, or could have been, raised in the outstanding litigation between the parties (the Litigation). Amended and Restated Note with Birch First Capital On July 23, 2015, pursuant to the terms and conditions of the Settlement Agreement referenced herein, the Company executed an amended and restated convertible debenture (the Amended and Restated Note) dated July 21, 2015 in the total amount of $300,000 bearing two percent (2%) interest per annum for a period of two years for the benefit of Birch First Capital. Pursuant to the terms of the Amended and Restated Note, $75,000 of the principal balance would be immediately converted at $0.10 per share for a total of 750,000 shares of the Companys Common Stock issued within five (5) days from the date of execution of the Settlement Agreement. The remaining $225,000 in principal and interest of the Amended and Restated Note will be convertible on a quarterly basis in the amount of $37,500 into shares of the Companys Common Stock at a share price equal to the lesser of $0.10 per share, or fifty percent (50%) of the three (3) intraday trading average for the twenty (20) day trading period prior to each conversion date, until paid in full, with accrued and unpaid interested due and payable in the final payment, under certain terms and conditions set forth in the Amended and Restated Note. Consulting and Advisory Agreement with Birch Advisors, LLC On July 23, 2015, pursuant to the terms and conditions of the Settlement Agreement referenced herein, the Company, executed a new Consulting and Advisory Agreement (the Agreement) dated July 21, 2015 with Birch Advisors, LLC (Consultant) for a period of twenty-four (24) months to commence upon the execution date of the signed Agreement, payable in the form of a convertible debenture (New Note) in the amount of $300,000 at two percent (2%) interest per annum for a period of two years. Pursuant to the Agreement, Consultant shall be paid $37,500 each quarter in the form of a reduction of the outstanding principal balance of the New Note, convertible into shares of the Companys Common Stock at a share price equal to the lesser of $0.10 per share or a twenty-five (25%) discount of the three (3) intraday trading average for the twenty (20) day trading period prior to each conversion date, until paid in full, with accrued and unpaid interested due and payable in the final payment. The Consultant will perform advisory and consultation services to the Company, including, but not limited to, assisting Companys management with general corporate operations, business development strategies, marketing and business plans, SEC compliance and advising the Company on other ad-hoc matters as appropriate. Pursuant to the terms of the Agreement, the Company shall have the right to terminate this Agreement for Cause at any time upon sixty (60) days written notice to the Consultant. The Consultant shall have the right to terminate this Agreement if Company fails to comply with any of the material terms of this Agreement, including without limitation its responsibilities for payment of fees as set forth in this Agreement. The parties agree that either the Company or Consultant may request a quarterly review by a designated third party reviewer, whom shall determine if the Company has the right to terminate the Agreement earlier for non-performance by the Consultant. The Agreement also contains other customary and standard provisions. Pay-off of the Convertible Debenture Promissory Note due to Iconic Holdings, LLC On March 16, 2015, the Company entered into a Note Purchase Agreement for a Convertible Debenture Promissory Note (hereafter Iconic Note) in the amount of $120,000 (net $100,000 after Original Issuance Discount and Fees) with Iconic Holdings, LLC (hereafter Iconic). Pursuant to the Note, the Company could repay the Note at any time on or before 180 days from March 16, 2015 pursuant to a prepayment schedule as displayed in the table below. See Note 8. Period After Effective Date (March 16, 2015) Period Date Range Total Repayment Amount 1-30 days March 16 - April 15 2015 $ 129,000 31-60 days April 16 - May 16 2015 $ 138,000 61-90 days May 17 - June 14 2015 $ 144,000 91-120 days June 15 - July 14 2015 $ 150,000 121-180 days July 15 - September 12 2015 $ 156,000 In July 2015, the Company and Iconic began negotiating on a reduced cash payment to retire the Iconic Note. Upon negotiation, Iconic accepted the Companys offer to accept a reduced payment of $135,000 to settle the Iconic Note in full, which was a $21,000 reduction in the amount that the Company was obligated to repay pursuant to the repayment schedule. The Company used the full proceeds of EMAs Convertible debenture to repay the Iconic Note upon Iconics acceptance of the Companys offer. No interest was accumulated under the Iconic Note. As of July 27, 2015, Iconic had deposited the Companys check payment in satisfaction of the debt, thereby retiring the Iconic Note in full and eliminating the Company from any further obligation pursuantly. |
SUMMARY OF SIGNIFICANT ACCOUN18
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2015 | |
Summary Of Significant Accounting Policies Policies | |
Principles of Consolidation | The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and include the accounts of the Company and its subsidiaries, Dynamic Energy Development Corporation and Transformation Consulting, Inc. All intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to intangible assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. |
Reclassifications | Certain reclassifications have been made in Statement of Operations for the year 2014 to the period ended June 30, 2015. These reclassifications impacted the classification of certain items within the Statement of Operations: relating to classification of interest expense. The reclassifications had no impact on previously reported total operating expenses, net loss, or stockholders' deficit. |
Impairment of Long-Lived Intangible Assets | We review our long-lived assets, including intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment, if any, is measured as the excess of the carrying amount over the fair value based on market value (when available) or discounted expected cash flows of those assets, and is recorded in the period in which the determination is made. Intangible assets not subject to amortization are tested annually for impairment and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. |
Development Costs | Development costs are expensed in the period they are incurred unless they meet specific criteria related to technical, market and financial feasibility, as determined by management, including but not limited to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project. If all criteria are met, the costs are deferred and amortized over the expected useful life, or written off if a product is abandoned. For the six months ended June 30, 2015, the Company incurred no development costs. As of June 30, 2015, the Company had no deferred product development costs. |
Income Taxes | Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted the accounting standards codified in ASC 740, Income Taxes as of its inception. Pursuant to those standards, the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not that it will utilize the net operating losses carried forward in future years. ASC 740-10-25 prescribes recognition thresholds that must be met before a tax position is recognized in the financial statements and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. An entity may only recognize or continue to recognize tax positions that meet a "more likely than not" threshold. Based on its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. The Company does not have any unrecognized tax benefits as of June 30, 2015 that, if recognized, would affect the Company's effective income tax rate. The Company's policy is to recognize interest and penalties related to income tax issues as components of income tax expense. The Company did not recognize or have any accrual for interest and penalties relating to income taxes as of June 30, 2015 and December 31, 2014. |
Cash | Cash include all highly liquid instruments with an original maturity of three months or less at the date of purchase. The Company maintains its cash in cash deposit accounts, which are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per legal ownership. At times, the Companys accounts may exceed federally insured limits. To date, the Company has not experienced any losses in such accounts. At June 30, 2015, the Company had no cash equivalents. |
Fair Value of Financial Instruments | The Companys financial instruments consist of cash, accounts payable, accrued liabilities, line of credit payable, loans from a related party, contingent consideration payable, and convertible note payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements. |
Fair Value Measurement | The Company values its derivative instruments under FASB ASC 820 which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). The three levels of the fair value hierarchy are as follows: Level 1 Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities. Level 2 Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 3 Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in managements best estimate of fair value. The Company's financial instruments consisted of cash, prepaid expense, deposit, accounts payable and accrued liabilities, line of credit, loan from stockholders and convertible debt. The estimated fair value of cash, prepaid expense, deposit, accounts payable and accrued liabilities, line of credit, loan from stockholders approximates its carrying amount due to the short maturity of these instruments. The recognition of the derivative values of convertible debt are based on the weighted-average Black-Scholes option pricing model. |
Revenue Recognition | The Company recognizes revenue in accordance with the FASB ASC Section 605-10-S99, Revenue Recognition, Overall, SEC Materials ("Section 605-10-S99"). Section 605-10-S99 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. |
Net Income (Loss) Per Common Share | Basic loss per common share (EPS) is calculated by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The number of common shares that are exercisable or converted into common stock is not material to affect diluted EPS results. Further, since the Company shows losses for the periods presented basic and diluted loss per share are the same for all periods presented. |
Common Share Non-Monetary Consideration | In situations where common shares are issued and the fair value of the goods or services received is not readily determinable, the fair value of the common shares is used to measure and record the transaction. The fair value of the common shares issued in exchange for the receipt of goods and services is based on the stock price as of the earliest of the date at which: i The counterpartys performance is complete; ii. commitment for performance by the counterparty to earn the common shares is reached; or iii. the common shares are issued if they are fully vested and non-forfeitable at that date. |
Stock-Based Compensation | On December 1, 2005, the Company adopted the fair value recognition provisions codified in ASC 718, Compensation-Stock Compensation. The Company adopted those provisions using the modified-prospective-transition method. Under this method, compensation cost recognized for all periods prior to December 1, 2005 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of November 30, 2005, based on the grant-date fair value and b) compensation cost for all share-based payments granted subsequent to November 30, 2005, based on the grant-date fair value. In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital. The results for periods prior to December 1, 2005 were not restated. The Company accounts for equity instruments issued in exchange for the receipt of goods or services from parties other than employees in accordance with ASC 505, Equity. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the counterparty. |
Share Purchase Warrants | The Company accounts for common share purchase warrants at fair value in accordance with ASC 815, Derivatives and Hedging. The Black-Scholes option pricing valuation method is used to determine fair value of these warrants. Use of this method requires that the Company make assumptions regarding stock volatility, dividend yields, expected term of the warrants and risk-free interest rates. |
Recently and Issued Accounting Pronouncements | In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for transfer of promised goods or services to customers. ASU-2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The amendments in this update also require disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flow arising from contracts. ASU-2014-09 is effective for annual and interim reporting periods beginning after December 15, 2016, using one of two retrospective application methods. Early application is not permitted. The Company is currently evaluating the effect that the adoption of ASU 2014-09 will have on the Companys consolidated financial statements. In April 2015, the FASB issued amended guidance in a FASB ASU on, "Interest-Imputation of Interest", which simplifies the balance sheet presentation of debt issuance costs. Under the new guidance, debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction from the liability. This treatment is consistent with the presentation of debt discounts. The new guidance is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted, and the new guidance should be applied retrospectively. The adoption of this update on January 1, 2016 will not have a material impact on our consolidated financial statements. Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC during the current reporting period did not, or are not believed by management to have a material impact on the Companys present or future consolidated financial statements. |
CONTINGENT CONSIDERATION PAYA19
CONTINGENT CONSIDERATION PAYABLE (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Contingent Consideration Payable Tables | |
CONTINGENT CONSIDERATION PAYABLE | At June 30, 2015 and December 31, 2014, the contingent consideration payable is as follows: As of June 30, As of December 31, Contingent consideration due 2015 2014 Contingent consideration due $ 2,000,000 $ 2,000,000 Less payments, net of refunds, to Director (984,638 ) (984,638 ) Payment of exercise of warrants (108,788 ) (108,788 ) Conversion of contingent consideration to common stock (906,574 ) (340,362 ) $ 0 $ 566,212 |
CAPITAL STOCK (Tables)
CAPITAL STOCK (Tables) | 6 Months Ended |
Jun. 30, 2014 | |
Capital Stock Tables | |
Warrants Outstanding | The following table summarizes the warrant activity for the six months ended June 30, 2015: Warrants Outstanding Weighted Average Number of Exercise Shares Price Balance, December 31, 2014 1,002,307 $ 259 Granted $ Exercised Expired/Cancelled (1,000,000 ) (2 ) Balance, June 30, 2015 2,307 $ 260 Exercisable at June 30, 2015 2,307 $ 260 |
BASIS OF PRESENTATION (Details
BASIS OF PRESENTATION (Details Narrative) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Basis Of Presentation Details Narrative | ||
Accumulated a deficit | $ 10,751,131 | $ 8,825,176 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2015 | |
Related Party Transactions Details Narrative | ||
Amounts due to a related party for Myers - LOC | $ 167,257 | |
Accrued interest under the Myers | 27,540 | |
Note balance | 587,564 | |
Accrued interest | $ 67,512 | |
Gross revenues | $ 0 |
CONTINGENT CONSIDERATION PAYA23
CONTINGENT CONSIDERATION PAYABLE (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Contingent Consideration Payable Details | ||
Contingent consideration due | $ 2,000,000 | $ 2,000,000 |
Less payments, net of refunds, to Director | $ (984,638) | $ (984,638) |
Payment of exercise of warrants | $ (108,788) | $ (108,788) |
Conversion of contingent consideration to common stock | $ (906,574) | $ (340,362) |
Total considearation payable | $ 0 | $ 566,212 |
CONTINGENT CONSIDERATION PAYA24
CONTINGENT CONSIDERATION PAYABLE (Details Narrative) - Jun. 30, 2015 - USD ($) | Total |
Contingent Consideration Payable Details Narrative | |
Note conversion agreements | $ 322,012 |
Note balance | 3,220,120 |
Common stock | $ 0.10 |
Gain Loss on extinguishment of debt | $ 107,816 |
LOAN PAYABLE _ RELATED PARTY (D
LOAN PAYABLE – RELATED PARTY (Details Narrative) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Loan Payable Related Party Details Narrative | ||
Loan payable | $ 13,325 | |
Accrued interest | $ 108,614 |
COMMITMENTS AND CONTRACTUAL O26
COMMITMENTS AND CONTRACTUAL OBLIGATIONS (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Dec. 31, 2014 | |
Commitments And Contractual Obligations Details Narrative | ||
Loans from a related party | $ 167,257 | $ 139,029 |
Accrued interest | 27,540 | |
Disputed liability | 212,794 | |
Line of credit payable | 151,000 | $ 151,000 |
Related party accrued interest | 61,794 | |
Stock compensation for investor relations | 772,594 | |
Accured liabilities | $ 40,000 |
CONVERTIBLE PROMISSORY NOTE (De
CONVERTIBLE PROMISSORY NOTE (Details Narrative) | Jun. 30, 2015USD ($) |
Accrued interest | $ 40,000 |
Convertible Note with Iconic Holdings, LLC [Member] | |
Outstanding balance | $ 120,000 |
Accrued interest | |
Convertible Note with JSJ Investments Inc. [Member] | |
Outstanding balance | $ 100,000 |
Accrued interest | 658 |
Convertible Note with LG Capital Funding, LLC [Member] | |
Outstanding balance | 52,500 |
Accrued interest | 129 |
Convertible Note with Adar Bays, LLC [Member] | |
Outstanding balance | 52,500 |
Accrued interest | $ 129 |
CAPITAL STOCK (Details)
CAPITAL STOCK (Details) - 6 months ended Jun. 30, 2015 - $ / shares | Total |
Capital Stock Details | |
Number of warrants shares, Beginning | 1,002,307 |
Granted warrants | |
Exercised warrants | |
Expired/Cancelled warrants | (1,000,000) |
Number of warrants shares, Ending | 2,307 |
Exercisable warrants | 2,307 |
Weighted Average Exercise Price warrants, Beginning | 259 |
Weighted Average Exercise Price warrants, Granted | |
Weighted Average Exercise Price warrants, Exercised | |
Weighted Average Exercise Price warrants, Expired/Cancelled | (2) |
Weighted Average Exercise Price warrants, Ending | 260 |
Weighted Average Exercise Price warrants, Exercisable | $ 260 |
CAPITAL STOCK (Details Narrativ
CAPITAL STOCK (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Dec. 31, 2014 | |
Capital Stock Details Narrative | ||
Preferred stock Series A, par value | $ 0.0001 | $ 0.0001 |
Preferred stock Series A, Authorized | 10,000,000 | 10,000,000 |
Preferred stock Series A, Issued | 0 | 0 |
Preferred stock Series A, outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, Authorized | 50,000,000 | 50,000,000 |
Common stock issued | 25,493,402 | 19,219,070 |
Common stock Outstanding | 25,493,402 | 19,219,070 |
Company share issued | 6,274,332 | |
Stock Purchase Warrants outstanding | $ 2,307 | |
Weighted average exercise price | $ 260 | |
Weighted average life of the warrants outstanding | 5 years 1 month 6 days | |
Aggregate intrinsic value of the outstanding | $ 0 |