XSport Global, Inc. - Quarter Report: 2019 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

For the Quarterly Period Ended June 30, 2019

 

or

 

 

For the Transition Period from _________ to _________

 

Commission file number: 333-201391

 

XSPORT GLOBAL, INC.

(Exact name of registrant as specified in its charter)

 

Wyoming		80-0873491
(State or other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

 

1800 Camden Road, #107-196 Charlotte, NC		28203
(Address of Principal Executive Offices)		(Zip Code)

 

(980) 875-4199

(Registrant’s telephone number, including area code)

 

N/A

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

 

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

 

Title of each class	Trading symbol(s)	Name of exchange on which registered
None	N/A	N/A

 

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 and post such files). Yes ☑ No ☐

 

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

 

Large accelerated filer	Accelerated filer	☐
Non-accelerated filer	Smaller reporting company	☑
	Emerging Growth company	☐

 

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

 

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

 

As of September 24, 2019, there were 110,867,402 shares of the registrant’s common stock outstanding.

 

XSPORT GLOBAL, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2019

TABLE OF CONTENTS

 

		Page
PART I. FINANCIAL INFORMATION		3
ITEM 1.	Unaudited Condensed Financial Statements	3
	Condensed Unaudited Consolidated Balance Sheets as June 30, 2019 and September 30, 2018	3
	Condensed Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2019 and 2018	4
	Condensed Unaudited Consolidated Statement of Stockholders’ Deficit for the Three and Nine Months Ended June 30, 2019	5
	Condensed Unaudited Consolidated Statement of Stockholders’ Deficit for the Three and Nine Months Ended June 30, 2018	6
	Condensed Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2019 and 2018	7
	Notes to Condensed Unaudited Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	29
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	35
ITEM 4.	Controls and Procedures	36
PART II. OTHER INFORMATION		37
ITEM 1.	Legal Proceedings	37
ITEM 1A.	Risk Factors	37
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
ITEM 3.	Defaults Upon Senior Securities	38
ITEM 4.	Mine Safety Disclosures	38
ITEM 5.	Other Information	38
ITEM 6.	Exhibits	39
SIGNATURES		42

 

 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

XSPORT GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

	June 30, 2019	September 30, 2018
ASSETS
Current assets
Cash	$147,702	$87,595
Accounts receivable, net	443,163	384,390
Prepaid expenses	32,128	20,900
Total current assets	622,993	492,885
Property and equipment, net	34,186	42,872
Intangible assets, net	117,154	128,647
Total assets	$774,333	$664,404
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Line of credit	$68,310	$98,310
Accounts payable and accrued liabilities	2,791,516	2,143,930
Accrued compensation to related parties	341,918	341,507
Current portion of long-term note payable	7,392	7,463
Notes payable - related parties	126,943	120,959
Current portion of convertible notes payable, net	512,041	146,816
Current portion of convertible notes payable - related parties	93,176	111,746
Derivative liability	290,472	-
Total current liabilities	4,231,768	2,970,731
Long-term note payable, net	12,016	19,067
Long-term convertible notes payable, net	404,864	398,424
Long-term convertible notes payable, related party, net	15,000	15,000
Total long-term liabilities	431,880	432,491
Total liabilities	4,663,648	3,403,222
Commitments and contingencies (note 16)
Stockholders' deficit
Preferred stock, 10,000,0000 shares authorized; par value $0.001;
no shares issued or outstanding	-	-
Common stock, 5,000,000,0000 shares authorized; par value $0.001;
52,432,303 and 37,206,807 shares issued and outstanding as of
June 30, 2019 and September 30, 2018, respectively	52,432	37,207
Additional paid-in capital	9,090,964	7,712,414
Accumulated deficit	(13,032,711)	(10,488,439)
Total stockholders' deficit	(3,889,315)	(2,738,818)
Total liabilities and stockholders' deficit	$774,333	$664,404

 

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

 

 

XSPORT GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

	For the Three Months Ended		For the Nine Months Ended
	June 30,		June 30,
	2019	2018	2019	2018
Revenue, net	$645,850	$-	$1,814,158	$-
Cost of revenue	401,570	-	1,100,637
Gross profit	244,280	-	713,521
Operating expenses:
Research and development	-	6,905	16,170	61,380
General and administrative	1,045,100	349,672	2,496,875	783,618
Total operating expenses	1,045,100	356,577	2,513,045	844,998
Loss from operations	(800,820)	(356,577)	(1,799,524)	(844,998)
Other expense:
Interest expense	208,338	9,495	589,695	26,713
Loss on settlement	18,968	-	18,968	-
Change in fair value of derivative liability	10,240	-	10,240	-
	237,546	9,495	618,903	26,713
Net loss	(1,038,366)	(366,072)	(2,418,427)	(871,711)
Deemed dividend for warrant down round feature	(93,257)	-	(125,845)	-
Net loss applicable to common stockholders	$(1,131,623)	$(366,072)	$(2,544,272)	$(871,711)
Net loss per common share - common stockholders - basic and diluted	$(0.02)	$(0.01)	$(0.06)	$(0.03)
Weighted average shares outstanding - basic and diluted	45,634,158	30,386,388	41,219,946	30,040,980

 

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

 

 

XSPORT GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

For the Three and Nine Months Ended June 30, 2019

(Unaudited)

 

			Additional		Total
	Common Stock	Common Stock	paid-in	Accumulated	Stockholders'
	Shares	Amount	Capital	Deficit	Deficit
Balance, September 30, 2018	37,206,807	$37,207	$7,712,414	$(10,488,439)	$(2,738,818)
Common stock issued for cash	333,334	333	24,667	-	25,000
Shares issued for deferred wages of related parties	1,883,359	1,883	134,927	-	136,810
Stock based compensation - related parties	4,896,967	4,898	295,416	-	300,314
Shares issued for third-party services	4,543,333	4,543	272,064	-	276,607
Beneficial conversion feature on convertible debt	-	-	355,193	-	355,193
Shares issued for conversion of debt	917,192	917	24,083	-	25,000
Shares issued for settlement	2,651,311	2,651	116,748		119,399
Warrants issued with convertible debt recorded as debt discount	-	-	29,607	-	29,607
Deemed dividend	-	-	125,845	(125,845)	-
Net loss	-	-	-	(2,418,427)	(2,418,427)
Balance, June 30, 2019	52,432,303	$52,432	$9,090,964	$(13,032,711)	$(3,889,315)
Balance, March 31, 2019	42,954,578	$42,955	8,404,163	$(11,901,088)	$(3,453,970)
Shares issued for deferred wages of related parties	643,667	644	43,190	-	43,834
Stock based compensation - related parties	972,222	972	40,859	-	41,831
Shares issued for third-party services	4,293,333	4,293	238,164	-	242,457
Beneficial conversion feature on convertible debt	-	-	130,500	-	130,500
Shares issued for conversion of debt	917,192	917	24,083	-	25,000
Shares issued for settlement	2,651,311	2,651	116,748		119,399
Deemed dividend	-	-	93,257	(93,257)	-
Net loss	-	-	-	(1,038,366)	(1,038,366)
Balance, June 30, 2019	52,432,303	$52,432	$9,090,964	$(13,032,711)	$(3,889,315)

 

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

 

 

XSPORT GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

For the Three and Nine Months Ended June 30, 2018

(Unaudited)

 

			Additional		Total
	Common Stock	Common Stock	paid-in	Accumulated	Stockholders'
	Shares	Amount	Capital	Deficit	Deficit
Balance, September 30, 2017	28,908,989	$28,909	$7,017,971	$(9,336,112)	$(2,289,232)
Common stock issued for cash	3,414,444	3,414	316,620	-	320,034
Stock based compensation	3,316,707	3,317	262,464	-	265,781
Net loss	-	-	-	(871,711)	(871,711)
Balance, June 30, 2018	35,640,140	$35,640	$7,597,055	$(10,207,823)	$(2,575,128)
Balance, March 31, 2018	29,990,046	$29,990	$7,148,242	$(9,841,751)	$(2,663,519)
Common stock issued for cash	2,333,387	2,333	197,701	-	200,034
Stock based compensation	3,316,707	3,317	251,112	-	254,429
Net loss	-	-	-	(366,072)	(366,072)
Balance, June 30, 2018	35,640,140	$35,640	$7,597,055	$(10,207,823)	$(2,575,128)

 

 

XSPORT GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

	For the Nine Months Ended
	June 30,
	2019	2018
Cash flows used in operating activities:
Net loss	$(2,418,427)	$(871,711)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	12,483	1,170
Amortization of intangible assets	11,493	-
Amortization of debt discount and derivative liability recognition	520,466	9,166
Change in fair value of derivative liability	10,240	-
Shares issued for third-party services	276,607	-
Stock-based compensation - related parties	300,314	158,906
Loss on settement	18,968	-
Accrued interest	23,247	17,527
Changes in operating assets and liabilities:
Accounts receivable	(58,773)	-
Prepaid expenses	(11,228)	(15,900)
Accounts payable and accrued liabilities	748,016	293,938
Accrued compensation to related parties	137,221	11,232
Net cash used in operating activities	(429,373)	(395,672)
Cash flows from investing activities:
Purchase of property and equipment	(3,797)	-
Net cash used in investing activities	(3,797)	-
Cash flows from financing activities:
Proceeds from convertible notes payable, net	505,400	-
Payments on convertible notes payable, related parties	-	(41,909)
Payments on notes payable	(7,123)	-
Payment on line of credit	(30,000)	-
Proceeds from sale of common stock	25,000	320,034
Net cash provided by financing activities	493,277	278,125
Increase (decrease) in cash	60,107	(117,547)
Cash – beginning of period	87,595	186,881
Cash – end of period	$147,702	$69,334
Supplementary cash flow information:
Interest paid	$8,409	$-
Income taxes paid	$-	$-
Non-cash investing and financing activities:	,
Shares issued for accrued compensation of related parties	$136,810	$-
Shares issued for conversion of debt	$25,000	$-
Shares issued for settlement	$119,399	$-
Accounts payable and accrued expenses settled for common stock - related parties	$-	$106,875
Beneficial conversion feature on convertible notes	$355,193	$-
Warrants issue in connection with debt recorded as debt discount	$29,607	$-
Deemed dividend for warrant down round feature	$125,845	$-

 

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

 

XSPORT GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 - NATURE OF THE ORGANIZATION AND BASIS OF PRESENTATION

 

XSport Global, Inc. and Subsidiary (the “Company”, “XSport” “us,” “our” or “we”), formerly known as TeleHealthCare, Inc. (“TeleHealthCare”), was incorporated under the laws of the State of Wyoming on December 10, 2012. Prior to the reverse merger described below, TeleHealthCare developed platforms in the telehealth industry.

 

On September 11, 2017, TeleHealthCare executed an Agreement and Plan of Merger (the “Merger Agreement”) with XSport Global, Inc., a North Carolina corporation, and HT Acquisition Corp., a Wyoming corporation and wholly-owned subsidiary of XSport Global, Inc. (the “Acquisition”) whereby the Acquisition was merged with and into the Company (the “Merger”) in consideration for 52,500,000 newly-issued shares of Common Stock of the Company (the “Merger Shares”) (17,500,000 shares post-reverse split). As a result of the Merger, XSport became a wholly-owned subsidiary of TeleHealthCare, and following the consummation of the Merger and giving effect to the retirement of approximately 15,666,666 shares (leaving approximately 7,957,666 post-split shares remaining prior to the Merger), and the sale of approximately 3,451,322 post-split shares at the Merger to accredited investors, the stockholders of XSport became beneficial owners of approximately 61% of our issued and outstanding common stock. Certain assets and liabilities of the original TeleHealthCare were then spun off, including assets and liabilities associated with CarePanda, with the Company assuming approximately $195,000 of remaining liabilities and changing the name of the newly merged company to XSport Global, Inc.

 

As a result of the Merger, the 17,325,000 post-split newly-issued shares were issued to the pre-existing XSport shareholders for all of the outstanding capital stock of XSport. XSport assumed net liabilities totaling $194,632, with the remaining assets and liabilities assumed by MD Capital Advisors, Inc., a Company owned by TeleHealthCare’s former CEO, in a split-off agreement. For accounting purposes, XSport was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of the Company. Accordingly, XSport’s assets, liabilities and results of operations became the historical consolidated financial statements of the Company and the Company’s assets, liabilities and results of operations was consolidated with XSport effective as of the date of the Merger. No step-up in basis or intangible assets or goodwill was recorded in this transaction.

 

On August 28, 2017, our Board of Directors approved a reverse stock split of our issued and authorized shares of common on the basis of three (3) shares for one (1) new share. Our shareholders approved the reverse split through a special meeting held on November 2, 2017. FINRA effected the reverse stock split in July 2018. Our authorized common stock remained unchanged with 500,000,000 shares of common stock. No fractional shares were issued in connection with the reverse stock split. Additionally, the Board of Directors and shareholders approved the authorization of 10,000,0000 shares of blank check preferred stock with a par value of $0.001 per share. All share or per share information included in these consolidated financial statements gives effect to the reverse split.

 

On March 22, 2018, the Board of Directors and Majority Shareholders approved an amendment to our Articles of Incorporation to change our name to XSport Global, Inc.

 

As a result of the Merger with XSport Global, our business plan has shifted to mobile applications for athletes of all ages and all skill levels, designed to engage and improve cognitive abilities. We are focused on developing a unique, industry-leading iOS and Android cognitive training mobile device application platform called XSport Global that we believe is differentiated from other players in the cognitive training space with a primary focus on the youth sports markets.

 

 

XSport Global, Inc.

 

HeadTrainer, Inc. was incorporated in the state of North Carolina on May 13, 2014. It subsequently changed its original name of Head Trainer, Inc. to HeadTrainer, Inc, then subsequently to XSport Global, Inc.

 

XSport Global (formerly known as HeadTrainer, Inc.) was established to create, develop, promote, market, produce, and distribute online/mobile application cognitive training tools initially intended for the youth, millennial and adult sports markets. The Corporation initially intends to outsource product manufacturing, distribution and the majority of its marketing efforts. The Corporation may work in conjunction with other organizations that provide computer programming, graphic design, and marketing expertise, and/or accomplish these same tasks in-house.

 

Shift Now Acquisition

 

On August 28, 2018, the Company entered into a stock purchase agreement (the “Agreement”) whereby the Company agreed to acquire all of the outstanding capital stock of Shift Now, Inc., a North Carolina corporation (“Shift Now”). The purchase price consisted of 700,000 shares of our common stock, par value $0.001 per share, with a value of $0.075 per share totaling $52,500, (of which 250,000 shares are contingent on meeting future performance targets) and two convertible promissory notes for $30,000.

 

Also, on August 28, 2018, the Company entered into an employment agreement (the “Employment Agreement”) with Kristi Griggs, the former principal shareholder of Shift Now (the “Employee”) to serve as Executive Vice President of the Company’s Shift Now Division (See note 7). Additionally, as additional consideration, the Company shall issue the Employee 150,000 shares of Common Stock at the 12-month anniversary of execution of the Employment Agreement. These shares have not yet been issued. Employee shall receive an additional 150,000 shares of Common Stock upon the 24-month anniversary of the Employment Agreement.

 

Shift Now is a full-service strategic, creative and digital marketing agency.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial statements, instructions to Form 10-Q and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the year ended September 30, 2018. In management's opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation to make our financial statements not misleading have been included. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year, or any other period.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting

 

The Company’s unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Company has a September 30 year-end.

 

Basis of Consolidation

 

The consolidated financial statements include the accounts of XSport Global, Inc. and its wholly-owned subsidiaries HeadTrainer, Inc. and Shift Now, Inc. All significant intercompany transactions have been eliminated in consolidation.

 

 

Business Segments

 

The Company has two business segments. XSport Global is focused on the development and sale software applications through subscriptions to end users. Shift Now provides marketing services to businesses.

 

Use of Estimates

 

The preparation of unaudited consolidated financial statements in accordance with United States GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to useful life and recoverability of long-lived assets, valuation of shares for services and assets, deferred income tax asset valuations and loss contingencies. 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 Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

Cash

 

For purposes of the statement of cash flows, the Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. There is no restricted cash or cash equivalents.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606 “Revenue from Contracts with Customers”. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In applying the revenue recognition model to contracts with customers, an entity: (1) identifies the contract(s) with a customer; (2) identifies the performance obligations in the contract(s); (3) determines the transaction price; (4) allocates the transaction price to the performance obligations in the contract(s); and (5) recognizes revenue when (or as) the entity satisfies a performance obligation.

 

XSport

 

XSport recognizes revenue from the sale of its software application thorough subscriptions received from end users. XSport had no revenues from its application during the three and nine months ended June 30, 2019 and 2018.

 

Shift Now

 

Shift Now recognizes service revenue when the service is completed under ASC Topic 606. The Company records project revenue and expenses as net revenue for projects where the Company receives payments from customers and has limited credit risk (acts as an agent versus principal).

 

Accounts Receivable

 

Accounts receivable are reported at their outstanding unpaid principal balances net of allowances for uncollectible accounts. The Company provides for allowances for uncollectible receivables based on management’s estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. The Company writes off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. As of June 30, 2019 and September 30, 2018, the Company’s allowance for doubtful accounts was $10,000 and $10,000, respectively.

 

 

Property and Equipment

 

Property and equipment consists of computer equipment, and furniture and fixtures, and is recorded at cost, less accumulated depreciation. Property and equipment is depreciated on a straight-line basis over its estimated life of three to seven years. We assess the impairment of long-lived assets on an ongoing basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our impairment review process is based upon an estimate of future undiscounted cash flows. Factors we consider that could trigger an impairment review include significant underperformance relative to expected historical or projected future operating results and significant negative industry or economic trends. Based on our analysis, there have been no impairment charges recorded during the nine months ended June 30, 2019 and 2018.

 

Intangible Assets

 

The Company periodically reviews the carrying value of intangible assets to determine whether impairment may exist. Intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. Specifically, an impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount. The Company uses level 3 inputs and a discounted cash flow methodology, along to estimate the fair value of a reporting unit. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units.

 

Convertible Notes Payable and Derivative Liability

 

The Company had convertible notes outstanding at June 30, 2019 with default payment provisions (default provisions that required payment ranging from 150% to 200% of the outstanding principal amount plus accrued interest). The Company determined that the default provision is an embedded component that qualifies as a derivative which should be bifurcated from the convertible notes and separately accounted for in accordance with FASB ASC 815, “Derivatives and Hedging”. ASC 815 –15–25–42 establishes criteria to determine whether puts are closely and clearly related to a debt host should the debt contain a substantial premium or default provision (one that is greater than 10% of the principal resulting from puts that require payoff for more than 110% of principal amount outstanding). The embedded derivative is recorded at fair value on the date of issuance and marked-to-market at each balance sheet date with the change in the fair value recorded as income or expense in the statement of operations.”

 

Income Taxes

 

The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which these temporary differences are expected to be recovered or settled. A valuation allowance is established to reduce net deferred tax assets to the amount expected to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in results of operations in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being recognized. Changes in recognition and measurement are reflected in the period in which the change in judgment occurs. Interest and penalties related to unrecognized tax benefits are included in income tax expense.

 

The Tax Cuts and Jobs Act (the Act) was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35% to 21% and required the Company to re-measure certain deferred tax assets and liabilities based on the rates at which they are anticipated to reverse in the future, which is generally 21%. The Company has reflected the aspects of the Act as it relates our calculations as of September 30, 2018.

 

 

Fair value

 

Financial instruments consist principally of cash, accounts receivable, accounts payable and accrued liabilities, line of credit, notes payable, convertible notes payable, and derivative liability. Except for the derivative liability (see table below), the recorded values of all financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

 

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by US GAAP. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:

 

 

 

 

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

 

Our derivative liabilities have been valued as Level 3 instruments.

 

	Level 1	Level 2	Level 3	Total
Fair value of convertible note derivative liability – June 30, 2019	$–	$–	$290,472	$290,472

 

The fair value of the derivative liability was based on the default provisions of the convertible notes. The Company recorded derivative liabilities of $290,472 related to our convertible notes during the nine months ended June 30, 2019.

 

Research and development expenses

 

Research and development expenses are expensed as incurred and are primarily comprised of product development.

 

Warrants

 

The Company has issued warrants in connection with financing arrangements. Warrants that do not qualify to be recorded as permanent equity are recorded as liabilities at their fair value using the Black- Scholes option pricing model. The relative fair value of the warrants, using the Black-Scholes model, is recorded in additional paid-in capital and as a debt discount. For warrants issued for services, the relative fair value is recorded in additional paid-in capital and stock-based compensation. For warrants with down round provisions, a deemed dividend is recorded for the change in fair value of the warrants when the down round provision is triggered.

 

 

Share-based Compensation

 

The Company measures the cost of awards of equity instruments based on the grant date fair value of the awards. That cost is recognized on a straight-line basis over the period during which the employee is required to provide service in exchange for the entire award. The fair value of stock options on the date of grant is calculated using the Black-Scholes option pricing model, based on key assumptions such as the fair value of common stock, expected volatility and expected term. The Company’s estimates of these important assumptions are primarily based on third-party valuations, historical data, peer company data and the judgment of management regarding future trends and other factors.

 

Equity Instruments Issued for Services

 

Issuances of the Company’s common stock for services is measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to employees and board members is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those financial reporting dates. Based on the applicable guidance, the Company records the compensation cost but treats forfeitable unvested shares as unissued until the shares vest.

 

Advertising Costs

 

The Company expenses the costs of advertising when the advertisements are first aired or displayed. All other advertising and promotional costs are expensed in the period incurred. Total advertising expense for the period ended June 30, 2019 and 2018 was $0 and $0, respectively. The Company’s mobile device application was inactive and not sold during the three and nine months ended June 30, 2019 and 2018.

 

Earnings (Loss) Per Share (“EPS”)

 

Basic EPS is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted EPS includes the effect from potential issuance of common stock, such as stock issuable pursuant to the exercise of stock options and warrants and the assumed conversion of convertible notes.

 

The following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive even though the exercise price could be less than the average market price of the common shares:

 

	Three and Nine Months Ended June 30,
	2019	2018
Convertible notes	53,446,854	4,298,984
Warrants	5,503,930	1,263,989
Potentially dilutive securities	58,950,784	5,562,973

 

 

Recent Accounting Pronouncements

 

On May 10, 2017, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) 2017-09 “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting”, which provides guidance to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The guidance is effective prospectively for all companies for annual periods beginning on or after December 15, 2017. Early adoption is permitted. The Company determined that the adoption of this ASU had no material impact on its financial position or results of operations.

 

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting. The new standard contains several amendments that will simplify the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The changes in the new standard eliminate the accounting for excess tax benefits to be recognized in additional paid-in capital and tax deficiencies recognized either in the income tax provision or in additional paid-in capital. The ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual reporting periods beginning after December 15, 2018. The Company determined that the adoption of this ASU had no material impact on its financial position or results of operations.

 

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)." ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This amendment will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” and ASU No. 2018-11 “Leases (Topic 842) Targeted Improvements" in July 2018, and ASU No. 2018-20 "Leases (Topic 842) - Narrow Scope Improvements for Lessors" in December 2018. ASU 2018-10 and ASU 2018-20 provide certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company will adopt this guidance beginning with its first quarter ended December 31, 2019. Management does not expect to have a material impact upon adoption.

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its unaudited condensed consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 3 - LIQUIDITY, UNCERTAINTIES AND GOING CONCERN

 

The Company is subject to a number of risks similar to those of early stage companies, including dependence on key individuals, the difficulties inherent in the development of a commercial market, the potential need to obtain additional capital necessary to fund the development of its products, and competition from larger companies.

 

 

These unaudited condensed consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has a working capital deficiency of approximately $3.6 million, has incurred a loss since inception resulting in an accumulated deficit of approximately $13.0 million as of June 30, 2019, and further losses are anticipated in the development of its business raising substantial doubt about the Company's ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months from the date of the issuance of these unaudited condensed consolidated financial statements with existing cash on hand and loans from directors and/or the private placement of common stock. There is, however, no assurance that the Company will be able to raise any additional capital through any type of offering on terms acceptable to the Company and cash on hand will not be sufficient for the next twelve months from the issuance of these financial statements.

 

NOTE 4 – PROPERTY AND EQUIPMENT, NET

 

The Company’s property and equipment, net consists of the following:

 

	June 30, 2019	September 30, 2018
Computer equipment	$18,099	$14,302
Autos	37,308	37,308
	55,407	51,610
Less: accumulated depreciation	(21,221)	(8,738)
	$34,186	$42,872

 

Depreciation expense was $12,483 and $1,170 for the nine months ended June 30, 2019 and 2018, respectively.

 

NOTE 5 – INTANGIBLE ASSETS, NET

 

The Company’s intangible assets, net consist of the following:

 

	June 30, 2019	September 30, 2018
Trade name and trademarks	$10,000	$10,000
Customer base	119,924	119,924
	129,924	129,924
Less: accumulated amortization	(12,770)	(1,277)
	$117,154	$128,647

 

The intangible assets have an estimated useful life ranging from 5 to 9 years.

 

Total amortization expense related to the intangible assets during the nine months ended June 30, 2019 was $11,493, resulting in an unamortized balance of $117,154 as of June 30, 2019.

 

 

NOTE 6 – ACQUISITION

 

Shift Now, Inc.

 

On August 28, 2018, the Company entered into a stock purchase agreement to acquire all of the outstanding capital stock of Shift Now for a total purchase price of $82,500. The purchase price included 700,000 shares of our common stock with a value of $52,500 and a convertible promissory note for $30,000. 250,000 shares of the 700,000 shares are contingent on future performance targets.

 

The total purchase price for Shift Now was allocated as follows:

 

Intangible assets	$129,924
Cash	123,625
Current assets	306,125
Note receivable – related party	3,183
Property and equipment	44,259
Line of credit	(98,310)
Note payable	(30,000)
Current liabilities	(396,306)
Total net assets acquired	$82,500
The purchase price consists of the following:
Convertible notes payable – related party	$30,000
Common Stock	52,500
Total purchase price	$82,500

 

Amortization of the intangible assets are deductible for tax purposes.

 

Intangible assets consist of customer base totaling $119,924 and trade name and trademarks totaling $10,000, with an estimated remaining useful life of 9 years and 5 years, respectively.

 

Proforma Information

 

The accompanying unaudited condensed consolidated financial statements include the results of operations of Shift Now for the nine months ended June 30, 2019, of which Shift Now contributed approximately $1,814,000 of revenue and a net loss of approximately $96,000.

 

The following unaudited pro forma information presents the unaudited condensed consolidated results of the Company’s operations and the results of the acquisition of Shift Now had it been consummated on October 1, 2017. Such unaudited pro forma information is based on historical unaudited financial information with respect to the Shift Now acquisition and does not include operational or other charges which might have been affected by the Company, including any pro forma adjustments for amortization of intangible assets which approximates $1,277 per month. The unaudited pro forma information for the nine months ended June 30, 2018 presented below is for illustrative purposes only and is not necessarily indicative of the results which would have been achieved or results which may be achieved in the future:

	Three Months Ended June 30,	Nine Months Ended June 30,
	2018	2018
Net revenue	$517,594	$2,028,095
Cost of revenues	288,165	1,586,598
Operating expenses	621,560	1,655,949
Net loss	$(401,326)	$(941,166)
Net loss per share – basic and diluted	$(0.01)	$(0.03)

 

 

NOTE 7- RELATED PARTIES

 

In June 2014, the Company entered into an agreement with HIP, LLC (“HIP”), a company owned by the Company’s former Chairman, Mr. Maurice Durschlag. Per the agreement, in exchange for the intellectual property consisting of certain patents and trademarks, the Company is to pay HIP periodic royalty payments equal to 1.75% of the revenue derived from the sale of any product incorporating the intellectual property. There was no material revenue from these products since the Company’s inception. This agreement was voided on November 30, 2018.

 

On July 24, 2015, the Company entered into a separation agreement and release of liability (the ‘Separation Agreement”) with the Company’s former Chief Executive Officer (the “former CEO”) whereby the Company agreed to pay the former CEO a severance payment of $150,000, plus repay a $50,000 unsecured promissory note, on or before December 31, 2017, or within 10 days of the Company receiving $700,000 in cash proceeds from the issuance of debt or equity securities. Additionally, the Company agreed to pay the former CEO a royalty of 0.5% of the Company’s gross revenue recognized from June 15, 2015 through January 25, 2018 payable on a quarterly basis. There were no material revenues during this period. The former CEO had initiated legal action against the Company and it received a judgement to collect the unpaid severance payment, promissory note, and royalties. On June 22, 2018, the Company paid $41,909 to the former CEO towards these amounts due, and an additional $25,000, $12,500 and $1,500 in January 2019, $1,500 in February 2019, and $1,500 in March 2019. On June 17, 2019, the Company entered into a Settlement Agreement and Release of All Claims, whereby the Company agreed to settle all outstanding amounts due, including the severance payment of $150,000 and accrued interest on the unsecured promissory note of $7,635, for $60,000 and 2,651,311 shares of common stock, resulting in a loss on settlement of $18,968 for the three and nine months ended June 30, 2019. No liability remains related to this settlement as of June 30, 2019.

 

On February 1, 2015, the Company entered into an Employment Agreement with one of the Company’s founders, Mr. Maurice Durschlag, to serve as Chairman of the Board of Directors (the “Former Chairman and current Director and CMO”). As of June 30, 2019 and September 30, 2018, a total of $27,750, remains accrued for this agreement and is included in accrued compensation to related parties on the accompanying balance sheet.

 

On September 15, 2017, we entered into an amended employment agreement with Mr. Maurice Durschlag as our CMO. Under the terms of the employment agreement, Mr. Durschlag is considered an “At Will” employee and shall receive annual compensation of $120,000 per year. As of June 30, 2019 and September 30, 2018, a total of $107,601 and $87,750 respectively, remains accrued for this agreement and is included in accrued compensation to related parties on the accompanying balance sheet. On September 1, 2018, the Board of Directors approved a resolution to increase the annual compensation under this agreement to $180,000 per year, allow an annual bonus of in the form of stock up to 1% of the total number of shares issued by the Company on last day of each calendar year, extend the term of the agreement through December 31, 2020, modify the stock compensation to 500,000 shares earned in increments of 125,000 per quarter commencing October 1, 2018, and modify the purchase price for the optional deferment of salary from $0.0227 to $0.0681 due the 3 for 1 reverse stock split. During the nine months ended June 30, 2019, the Company issued at total of 881,056 shares of the Company’s common stock with a value of $63,975 in payment for unpaid salary under the agreement.

 

On September 15, 2017, we entered into an amended employment agreement with Mr. Robert Finigan as our former Chairman and CEO. Under the terms of the employment agreement, Mr. Finigan is considered an “At Will” employee and shall receive annual compensation of $150,000 per year and be immediately vested in the Company’s health and benefits package. Mr. Finigan was also granted 1,000,000 shares of the Company’s common stock (333,333 post-reverse stock split), with a fair value of $22,700, that vests as to 41,667 shares on each of October 1, 2017, January 1, 2018, April 1, 2018, July 1, 2018, October 1, 2018, January 1, 2019, April 1, 2019 and July 1, 2019. Mr. Finigan also may defer up to 50% of his annual salary to purchase an equivalent number of shares in the Company based upon a purchase price of $0.0227 per share. Mr. Finigan is also entitled to reimbursement of business expenses and customary provisions for vacation, sick time and holidays. Determinations with regard to bonus or option grants are made by the Board of Directors. As of June 30, 2019 and September 30, 2018, a total of $53,075 and $42,327, respectively, remains accrued for this agreement and is included in accrued compensation to related parties on the accompanying balance sheet. In June 2018, the Company granted Mr. Finigan 1,263,989 shares and 871,880 shares of common stock for unpaid wages as Chairman and CEO, as well as 241,667 shares for incentives and director services. On September 1, 2018, the Board of Directors approved a resolution to increase the annual compensation under this agreement to $200,000 per year, allow an annual bonus of in the form of stock up to 1% of the total number of shares issued by the Company on last day of each calendar year, extend the term of the agreement through December 31, 2020, modify the stock compensation to 500,000 shares earned in increments of 125,000 per quarter commencing October 1, 2018, and modify the purchase price for the optional deferment of salary from $0.0227 to $0.0681 due the 3 for 1 reverse stock split. During the nine months ended June 30, 2019, the Company issued a total of 1,002,303 shares of the Company’s common stock with a value of $72,836 in payment for unpaid salary under the agreement. On May 16, 2019, Robert Finigan resigned as Chief Executive Officer (Principal Executive Officer), Principal Financial Officer and as Chairman of the Board of Directors of the Company.

 

 

On August 28, 2018, the Company entered into an employment agreement (the “Employment Agreement”) with Kristi Griggs, the former principal shareholder of Shift Now (the “Employee”) to serve as Executive Vice President of the Company’s Shift Now Division. The Employment Agreement provides that upon consummation of the Merger, Employee shall be entitled to receive a salary of $100,000 per year plus a bonus of 5% of net revenue of clients managed by Employee or 1.5% of total gross revenues of Shift Now to be paid on the last pay period of the month for the prior month’s activity. Additionally, as additional consideration, the Company shall issue the Employee 150,000 shares of Common Stock at the 12-month anniversary of execution of the Employment Agreement. These shares have not yet been issued. Employee shall receive an additional 150,000 shares of Common Stock upon the 24-month anniversary of the Employment Agreement. The Employee may receive severance of the greater of six months’ salary or $50,000 upon termination of the Employment Agreement and shall be entitled to retain all equity ownership earned as of the date of termination.

 

In February, 2019, the Company entered an Employment Agreement with its new President and CEO. The Employment Agreement has a two-year term, includes annual compensation of $180,000 per year, the issuance of 5,000,000 shares of the Company’s common stock of which 2,000,000 shares vest immediately, with the remainder vesting equally over 12 months. The total unpaid balance under this agreement was $51,000 as of June 30, 2019.

 

On March 18, 2019, the Company entered an Employment Agreement for the position of Vice President of Business Development. The Employment Agreement has a two-year term, includes annual compensation of $120,000 per year contingent on the successful capital raise of more than $500,000, and the issuance of 2,000,000 shares of the Company’s common stock of which 200,000 shares vest immediately, with the remainder vesting equally over 8 quarters of the Employment Agreement. The total unpaid balance under this agreement was $3,000 as of June 30, 2019.

 

As of June 30, 2019 and September 30, 2018 an additional $99,492 and $46,806, respectively, was accrued for other employees and employer taxes which is included in accrued compensation to related parties on the accompanying unaudited condensed balance sheet.

 

NOTE 8 – ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND ADJUSTMENT

 

Accounts payable and accrued liabilities are as:

 

	June 30, 2019	September 30, 2018
Accounts payable	$1,070,674	$611,840
Accrued consulting and brand endorsement fees	1,511,666	1,361,666
Accrued other	209,176	170,424
	$2,791,516	$2,143,930

 

NOTE 9 – LINE OF CREDIT, NOTES PAYABLE RELATED PARTIES AND NON-RELATED PARTY

 

Note payable

 

The Company has a note payable dated January 2017 to a finance company for the finance of an automobile. The note bears interest at 3.25% per and calls for 60 monthly payments of $685 per month through March 2022. Total balance of the note is $19,408 as of June 30, 2019, with current maturities of $7,392 and long-term maturities of $12,016.

 

 

Line of Credit

 

The Company has a $100,000 line of credit with a bank with a balance of $68,310 and $98,310 as of June 30, 2019 and September 30, 2018, respectively. The line bears interest at prime rate (5.50% as of June 30, 2019), or a minimum of 4.5%, is collateralized by substantially all assets of the Company, and matured on May 15, 2019. This line of credit is currently in default.

 

Notes payable – related parties

 

Current related party notes payable are as follows at June 30, 2019 and September 30, 2018, respectively:

 

	June 30, 2019	September 30, 2018
Notes payable, shareholder, 0% interest, unsecured, due upon demand. On May 18, 2016, the noteholder converted the note to an 8% unsecured promissory note due August 1, 2016. This note is in default as of June 30, 2019.	$100,000	$100,000
Notes payable, shareholder, 0% interest, unsecured, due upon demand	2,000	2,000
	102,000	102,000
Accrued interest	24,943	18,959
	$126,943	$120,959

 

Interest expense related to these notes for the nine months ended June 30, 2019 and 2018 was $5,984 and $5,984, respectively.

 

 

NOTE 10 – CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable are as follows at June 30, 2019 and September 30, 2018, respectively:

 

	June 30, 2019	September 30, 2018
Convertible note payable, including interest at 10%, due December 31, 2016, convertible at $1.47 per share. This note is in default as of June 30, 2019 and continues to accrue interest at 10%.	$100,000	$100,000
Convertible notes payable dated May 5, 2017, including interest at 10%, due May 5, 2018. On June 28,2019, this note was converted in full for 40,000 shares of the Company’s common stock.	-	10,000
Four convertible denture notes payable dated in August and September 2017, including interest at 0% (12% after an event of default) due in August and September of 2020, convertible at any time into shares of the Company’s common stock at $0.0615 per share. The Company recorded a debt discount of $25,756 for the beneficial conversion feature upon issuance, with an unamortized balance of $10,136 and $16,576 as of June 30, 2019 and September 30, 2018, respectively. A total of $200,000 of these notes were assumed in the Merger, with $40,000 received in cash subsequent the Merger. These debentures went into default subsequent to June 30, 2019.	229,864	223,424
Three convertible denture notes payable dated in August and September 2018, including interest at 0% (12% after an event of default) due in August and September of 2021, convertible at any time into shares of the Company’s common stock at $0.075 per share.	175,000	175,000
Convertible note payable dated December 14, 2018, with principal of $57,000, interest at 8%, due December 14, 2019, convertible after 180 days into shares of the Company’s common stock at $0.25 per share, an original issue debt discount of $7,000 and a beneficial conversion feature of $50,000, with an unamortized balance of $2,911 and $27,649, respectively, as of June 30, 2019. The terms of the note include a reduced conversion price at a 25% discount the price of the issuance of subsequent common stock equivalents, resulting in a conversion price of $0.012 per share as of June 30, 2019, due to the June 14, 2019 issuance of the note below. In June 2019, the noteholder converted $15,000 of this note for 877,192 shares of the Company’s common stock. This note is currently in default which created a derivative liability with a balance of $8,895 as of June 30, 2019.	11,440	-
Convertible note payable dated December 17, 2018, with principal of $165,000, interest at 18%, due December 17, 2019, convertible at any time into shares of the Company’s common stock at a price equal to 65% of the lowest one day trading price during the prior 20 day trading period , with an original issue debt discount of $15,000, and a $24,344 debt discount related to the relative fair value of the warrants issued with the note, and a $70,656 debt discount related to the beneficial conversion feature. The total debt discount was expensed in full as this note is in default as of June 30, 2019. Additionally, the Company recorded a derivative liability with a balance of $55,000, which was transferred to the balance of the note in March 2019, with no derivative liability remaining related to this note as of June 30, 2019. The note includes anti-dilution provisions which may impact the conversion price in the future.	165,000	-
On January 3, 2019, the Company entered into convertible note payable for $53,000, including an original issue discount of $8,300, resulting in net proceeds of $44,700, with interest at 8%, due January 3, 2020, convertible after 180 days at a price of 65% of the average of the lowest two trading prices of the Company’s common stock during the 15 trading days prior to conversion, with a $27,006 debt discount, and derivative liability related to the beneficial conversion feature with a balance of $27,534 as of June 30, 2019. The unamortized balance of the original issue discount and beneficial conversion features was $4,252 and $13,836, respectively, as of June 30, 2019. This note is currently in default.	34,912	-