XTREME FIGHTING CHAMPIONSHIPS, INC. - Quarter Report: 2020 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2020

OR

For the transition period from ______________to _______________.

Commission File Number 333-140177

XTREME FIGHTING CHAMPIONSHIPS, INC.

(Exact name of registrant as specified in its charter)

(914) 290-4919

Registrant’s telephone number, including area code

Duke Mountain Resources, Inc.

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

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

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

Indicate by check whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,”

“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 13(a) of the Exchange Act. [  ]

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

FORM 10-Q

INDEX

Part I Financial Information

Item 1. Financial Statements

The Company’s unaudited financial statements for the nine months ended September 30, 2020 and for comparable periods in the prior year are included below. The financial statements should be read in conjunction with the notes to financial statements that follow.

XTREME FIGHTING CHAMPIONSHIPS, INC.

FKA: DUKE MOUNTAIN RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS AS OF

XTREME FIGHTING CHAMPIONSHIPS, INC.

FKA: DUKE MOUNTAIN RESOURCES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

See the accompanying notes to the unaudited consolidated financial statements.

XTREME FIGHTING CHAMPIONSHIPS, INC.

FKA: DUKE MOUNTAIN RESOURCES, INC.

UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

See accompanying notes to unaudited consolidated financial statements.

XTREME FIGHTING CHAMPIONSHIPS, INC.

FKA: DUKE MOUNTAIN RESOURCES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED

See the accompanying notes to the unaudited condensed consolidated financial statements.

XTREME FIGHTING CHAMPIONSHIPS, INC.

FKA: DUKE MOUNTAIN RESOURCES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The unaudited financial statements for the nine months ending September 30, 2020, are not necessarily indicative of the results for the remainder of the fiscal year. The consolidated financial statements as of December 31, 2019, have been audited by an independent registered public accounting firm. The accounting policies and procedures employed in the preparation of these condensed consolidated financial statements have been derived from the audited financial statements of Xtreme Fighting Championships, Inc. F/K/A/ Duke Mountain Resources Inc. (the “Company”) for the year ended December 31, 2019, which are contained in the Company’s annual report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2020. The consolidated balance sheet as of December 31, 2019 was derived from those financial statements.

Description of Business

Duke Mountain Resources, Inc. (the “Company”), a Nevada corporation, was formed on May 3, 2006 and has an authorized capital of 76,000,000 shares of common stock, par value of $0.001 per share.

On September 21, 2007, the Company established a Canadian operating subsidiary Duke Mountain Resources Canada, Inc. The Canadian operating subsidiary will conduct all mineral explorations for Duke Mountain Resources, Inc. Duke Mountain Resources Canada, Inc. controls over 1,503 hectares of mineral claims. All mineral claims were transferred to our Canadian operating subsidiary Duke Mountain Resources Canada, Inc., on December 21, 2007 from our former President and Chief Executive Officer. During the year ended December 31, 2014, the Company fully impaired these mineral claims totaling $80,000.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Duke Mountain Resources Canada, Inc. and Fostung Resources Ltd (“Fostung Resources”). All significant intercompany balances and transactions have been eliminated.

Duke Mountain Resources, Inc., together with its wholly-owned subsidiaries, were an exploration stage company focused on the acquisition, exploration, and development of gold, silver and base metal properties.  In 2014, the Company ceased operations.

In the second quarter of 2020, the Company had a change of control. In connection with the change in control, the Company acquired the rights to Xtreme Fighting Championships, Inc., the largest independent mixed martial arts organization in the world.  On July 3, 2020, the Company changed its’ name to Xtreme Fighting Championships, Inc.

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2020 and 2019, and for all periods presented herein, have been made.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.

Revenue Recognition and Unearned Revenue

Revenue is recognized in accordance with ASC 606. The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. 

Intangible Assets

Intangible assets include customer contracts purchased and recorded based on the cost to acquire them. These assets are amortized over 5 years. Useful lives of intangible assets are periodically evaluated for reasonableness and the assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may no longer be recoverable.

Goodwill and other Intangible Assets

In accordance with ASC 350-30-65, “Intangibles - Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Factors the Company considers to be important which could trigger an impairment review include the following:

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

Property and Equipment

Property and equipment are carried at historical cost less accumulated depreciation. Depreciation is based on the estimated service lives of the depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized. Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they are removed from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance are expensed as incurred.

The estimated useful lives of property and equipment are generally as follows:

 Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not consider it necessary to record any impairment charges during the periods ended September 30, 2020 and September 30, 2019, respectively.

Accounting for Derivative Instruments

Derivatives are required to be recorded on the balance sheet at fair value. These derivatives, including embedded derivatives in the Company’s structured borrowings, are separately valued and accounted for on the Company’s balance sheet. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market-based pricing models incorporating readily observable market data and requiring judgment and estimates.

The Company did not identify any assets or liabilities that are required to be presented on the consolidated balance sheets at fair value in accordance with the accounting guidance. The carrying amounts reported in the balance sheet for cash, accounts payable, and accrued expenses approximate their estimated fair market value based on the short-term maturity of the instruments.

Stock Based Compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

Revenue Recognition

Revenue is recognized in accordance with ASC 606. The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Earnings per Common Share

Net income (loss) per common share is calculated in accordance with ASC Topic 260: Earnings per Share (“ASC 260”). Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. In periods where the Company has a net loss, all dilutive securities are excluded.

Related Party Transactions

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements.

Subsequent Events

Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements.

NOTE 2 - GOING CONCERN CONSIDERATIONS

The accompanying consolidated financial statements are prepared assuming the Company will continue as a going concern. At September 30, 2020, the Company had an accumulated deficit of $29,498,764, negative working capital of $214,540 and net loss of $6,867,885 during the nine months ended September 30, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements. The ability of the Company to continue as a going concern is dependent upon obtaining additional capital and financing. Management intends to attempt to raise additional funds by way of a public or private offering. While the Company believes in the viability of its strategy to raise additional funds, there can be no assurances to that effect. Without additional capital, we will be unable to achieve our business objectives, and may be forced to curtail our operations, reduce headcount, and/or temporarily cease our operations until requisite capital is secured. The consolidated financial statements do not include any adjustments relating to classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 - DEPOSITS

At September 30, 2020 and December 31, 2019, deposits consisted of the following:

NOTE 4 – PROPERTY AND EQUIPMENT

At September 30, 2020 and December 31, 2019, property and equipment, net of fully depreciated assets, consisted of the following:

Depreciation expense for the three months ended September 30, 2020 and 2019 was $0 and $0, respectively. Depreciation expense for the nine months ended September 30, 2020 and 2019 were $0 and $0, respectively.

NOTE 5 – NOTES PAYABLE

On December 31, 2013, the Company entered into a Stock Purchase agreement with a related party pursuant to which the Company purchased 100% of the issued and outstanding shares of Fostung Resources, Ltd. for a promissory note in the amount of $80,000. The Promissory Note bears an annual interest rate of 4%, which is compounded annually and has a maturity date of December 31, 2015.

On March 17, 2014, the Company signed a promissory note for $27,000 with related third party.  The note bears an interest rate of 7%, and has a maturity date of March 17, 2016.

Effective June 30, 2019, the legal custodian of the Company assumed and forgave the notes payable and related accrued interest of the Company.

On January 23, 2020, Friction & Heat, LLC, the majority shareholder of Duke Mountain Resources, Inc. ("Company") entered into an agreement to sell Mr. Smith 190,000,000 shares of the Company's common stock, which is the control block of the Company.  

NOTE 6 – ACQUISITION OF ASSETS OF XTREME FIGHTING CHAMPIONSHIPS, INC.

On May 10, 2020, the Company acquired intellectual property assets of Xtreme Fighting Championships, Inc.  These assets included the video library, marketing and advertising materials, trade names, internet domains and trade secrets.  The Company issued 16,655,002 shares of common stock, valued at $23,150,453, for intellectual property assets.  The following summarizes the intangible assets:

The estimated remaining useful life is 4.61 years.  Estimated future amortization is as follows:

NOTE 7 - STOCKHOLDERS’ DEFICIT

Preferred Stock

The Company has authorized and issued 2 shares of Series AA Convertible Preferred Stock.  These shares have a liquidation preference to common stock equal to $0.125 per share.  Each share of Series AA Convertible Preferred Stock shall be convertible, at the option of the holder, into an amount equal to 40% of the Company’s fully paid and non-assessable shares of Common Stock.  The holders of Series AA Preferred Stock shall have voting rights equal 40% of the Company’s fully paid and non-assessable shares of Common Stock.

Common Stock

The following summarizes the activity of the Company’s common stock for the nine months ended September 30, 2020:

On January 23, 2020, Friction & Heat, LLC, the majority shareholder of the Company entered into an agreement to sell Mr. Smith 190,000,000 shares of the Company's common stock, which is the control block of the Company.  As part of the change in control, 170,000,000 shares of the Company’s common stock were returned to Treasury and Mr. Smith was issued 2 shares of Series AA Convertible Preferred Stock.

On May 10, 2020 the Company issued 16,655,002 shares of common stock for the acquisition of the assets of Xtreme Fighting Championships, Inc. (See Note 6).

On July 30, 2020 the Company issued 16,640,040 shares of common stock for the replace of an equal number of shares previous issued and then cancelled.

On September 15, the Company issued 5,000,000 shares of common stock for $275,000.

During the nine months ended September 30, 2020, the Company issued 3,384,411 shares of common stock at prices ranging from $1.15 to $1.49 per share for services, totaling $4,703,157.

NOTE 8 – UNEARNED REVENUE

Unearned revenues represent sponsorships received for future tournaments.  The tournaments are scheduled for the fall of 2020.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

The Company has received notice from an individual asserting to be a former investor in Xtreme Fighting Championships, Inc.  The Company believes this assertion is without merit.

On January 23, 2020, Friction & Heat, LLC, the majority shareholder of the Company entered into an agreement to sell Mr. Smith 190,000,000 shares of the Company's common stock, which is the control block of the Company.

On January 30, 2020, the Company entered into a Securities Purchase Agreement to acquire 800,000,000 shares of Xtreme Fighting Championships, Inc. in exchange for $10,000 at the signing of the agreement and $100,000 at the closing of the transaction.  The transaction has not yet closed.

COVID-19

On March 11, 2020, the World Health Organization announced that infections of the novel Coronavirus (COVID-19) had become pandemic, and on March 13, the U.S. President announced a National Emergency relating to the disease. There is a possibility of continued widespread infection in the United States and abroad, with the potential for catastrophic impact. National, state and local authorities have required or recommended social distancing and imposed or are considering quarantine and isolation measures on large portions of the population, including mandatory business closures. These measures, while intended to protect human life, are expected to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration. Some economists are predicting the United States will soon enter a recession. The sweeping nature of the coronavirus pandemic makes it extremely difficult to predict how the Company’s business and operations will be affected in the longer run, but we expect that it may materially affect our business, financial condition and results of operations. The extent to which the coronavirus impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. Moreover, the coronavirus outbreak has begun to have indeterminable adverse effects on general commercial activity and the world economy, and our business and results of operations could be adversely affected to the extent that this coronavirus or any other epidemic harms the global economy generally and/or the markets in which we operate specifically. Any of the foregoing factors, or other cascading effects of the coronavirus pandemic that are not currently foreseeable, could materially increase our costs, negatively impact our revenues and damage the Company’s results of operations and its liquidity position, possibly to a significant degree. The duration of any such impacts cannot be predicted.

The Company may incur significant delays and/or expenses in addition to, impairing its ability to secure additional financing, relating to the worldwide COVID-19 (coronavirus) pandemic. It is presently unknown whether and to what extent the Company’s supply chains may be affected if the pandemic persists for an extended period of time. The Company may incur significant delays or expenses relating to such events outside of its control, which could have a material adverse impact on its business, operating results and financial condition. The Company’s reliance on securing additional capital for its public company expenses may be impaired due to the effect on the U.S. financial markets. The inability to obtain appropriate financing, may affect its compliance requirements as a public company. The Company has been using its working capital from its operating subsidiaries, to support its public company expenses. The continued drain on its working capital have forced the Company to incur cutbacks, which may affect its future operating revenue as well as, its ability to continue operations.

NOTE 10 – CONVERTIBLE PROMISSORY NOTES PAYABLE

Convertible promissory notes payable

On September 30, 2020, the Company entered into a Convertible Promissory Note with Harbor Gates Capital, LLC, ("HGC") issuing to HGC a convertible promissory note in the aggregate principal amount of $210,000 with a $10,000 original issue discount due to HGC. The note bears interest at 10% per annum and may be converted into common shares of the Company's common stock at a conversion price of $0.30. The Company also agreed to issue HGC 100,000 shares of common stock as an investment incentive.

The Agreement contains customary representations and warranties and customary affirmative and negative covenants. These covenants include, among other things, certain limitations on the ability of the Company to: (i) pay dividends on its capital stock; (ii) make distributions in respect of its capital stock; (iii) acquire shares of capital stock; and, (iv) sell, lease or dispose of assets. Pursuant to the Agreement, the Holders are granted demand registration rights and pre-emptive rights as set forth in the Agreement. The Agreement includes customary events of default, including, among others: (i) non-payment of amounts due thereunder, (ii) non-compliance with covenants thereunder, (iii) bankruptcy or insolvency (each, an “Event of Default”). Upon the occurrence of an Event of Default, a majority of the Holders may accelerate the maturity of the Indebtedness. 

NOTE 11 - RELATED PARTY TRANSACTIONS

As of September 30, 2020, the accounts payable due to related party includes advances of $17,070.  During the three months ended September 30, 2020, the Company also paid $184,500 to Emerald Coast Investments which is owned by Jim Barnes, who serves as the Company’s counsel.

NOTE 12 - SUBSEQUENT EVENTS

On October 12, 2020, the Company issued an aggregate of 213,263 shares of common stock for services.

On October 19, 2020, the Company issued an aggregate of 24,000,000 shares of common stock for services.

On November 5, 2020, the Company issued an aggregate of 600,000 shares of common stock related to convertible notes.

On November 5, 2020, the Company issued an aggregate of 571,500 shares of common stock related to convertible notes.

 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This section and other parts of this Form 10-Q quarterly report includes "forward-looking statements", that involves risks and uncertainties. All statements other than statements of historical facts, included in this Form 10-Q that address activities, events, or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strength, goals, expansion and growth of our business and operations, plans, references to future success, reference to intentions as to future matters, and other such matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors that we believe are appropriate in the circumstances. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks, uncertainties, and other factors, many of which are beyond our control.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, we do not assume responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results.

Overview

Xtreme Fighting Championships, Inc., formerly Duke Mountain Resources, Inc. (the "Company", "we", or "us") was incorporated under the laws of the State of Nevada on May 3, 2006.

Certain statements contained below are forward-looking statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

Our auditors have issued a going concern opinion in the financial statements for the year ended December 31, 2019.

Results of Operations for the Three and Nine Months Ended September 30, 2020 compared to the Three and Nine Months Ended September 30, 2019

Operating Revenues

We have generated revenues of $0 for the three months ended September 30, 2020 and $0 for the three months ended September 30, 2019. We have generated revenues of $0 for the nine months ended September 30, 2020 and $0 for the nine months ended September 30, 2019.

Operating Expenses and Net Loss

Operating expenses for the three months ended September 30, 2020 were $1,565,826 compared with $22,456 for the three months ended September 30, 2019.  Operating expenses for the three months ended September 30, 2020 consisted of general and administrative expenses of $42,262 for the three months ended September 30, 2020 compared to $22,456 for the three months ended September 30, 2019, professional fees of $366,041 for the three months ended September 30, 2020 compared to $0 for the three months ended September 30, 2019 and amortization expenses of $1,157,523 for the three months ended September 30, 2020 compared to $0 for the three months ended September 30, 2019.

Operating expenses for the nine months ended September 30, 2020 were $6,867,885 compared with $34,456 for the nine months ended September 30, 2019.  Operating expenses for the nine months ended September 30, 2020 consisted of general and administrative expenses of $4,765,560, of which $4,723,298 was for stock based compensation, for the nine months ended September 30, 2020 compared to $34,456 for the nine months ended September 30, 2019, professional fees of $366,041 for the nine months ended September 30, 2020 compared to $0 for the nine months ended September 30, 2019 and amortization expenses of $1,736,284 for the nine months ended September 30, 2020 compared to $0 for the nine months ended September 30, 2019.

Other income (expense) for the three months ended September 30, 2020 were $1,500,000 compared with $145,684 for the three months ended September 30, 2019.  Other income (expense) for the three months ended September 30, 2020 consisted of interest expense related to the issuance of common stock for cash of $1,500,000 compared to $0 for the three months ended September 30, 2019 and debt forgiveness of $0 compared to $150,197 for the three months ended September 30, 2019.

Other income (expense) for the nine months ended September 30, 2020 were $1,500,000 compared with $145,684 for the nine months ended September 30, 2019.  Other income (expense) for the nine months ended September 30, 2020 consisted of debt forgiveness of $0 compared to $150,197 for the nine months ended September 30, 2019 and interest expense of $1,500,000 compared to ($4,513) for the nine months ended September 30, 2019.

During the three months ended September 30, 2020, the Company recorded a net loss of $3,065,826 compared with net loss of $22,456 for the three months ended September 30, 2019.

During the nine months ended September 30, 2020, the Company recorded a net loss of $8,367,885 compared with net gain of $111,228 for the nine months ended September 30, 2019.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. At September 30, 2020, we had a cash balance of $79,876. We have a negative working capital of $214,540 at September 30, 2020.

Our current assets at September 30, 2020 increased from December 31, 2019 and included cash and deposits.

Our current liabilities at September 30, 2020 increased 828% from December 31, 2019 and included our accounts payable, due to related party, convertible debt and unearned revenue in the ordinary course of our business.

At September 30, 2020, the Company had an accumulated deficit of $29,498,794, negative working capital of $214,540 and net loss of $8,367,885 during the nine months ended September 30, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements. The ability of the Company to continue as a going concern is dependent upon obtaining additional capital and financing. Management intends to attempt to raise additional funds by way of a public or private offering. While the Company believes in the viability of its strategy to raise additional funds, there can be no assurances to that effect. Without additional capital, we will be unable to achieve our business objectives, and may be forced to curtail our operations, reduce headcount, and/or temporarily cease our operations until requisite capital is secured. The consolidated financial statements do not include any adjustments relating to classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

Operating Activities

Net cash flows used in operating activities for the nine months ended September 30, 2020 amounted to $431,089 and were primarily attributable to our net loss of $8,367,885, total amortization expense of $1,736,284, stock based compensation of $4,703,157, fair value of stock issued of $1,500,000 and net change in assets and liabilities of $661, primarily attributable to a increase in deposits of $50,000, an increase in unearned revenue of $46,355, increase in accounts payable of $800 and an increase in related party accounts payable of $200.

Net cash flows used in operating activities for the nine months ended September 30, 2019 amounted to $0 and were primarily attributable to our net gain of $111,228, increase in accounts payable of $24,185 and an increase in related party accounts payable of $14,784.

Investing Activities

Net cash flows used in investing activities were $14,000 and $0, for the nine months ended September 30, 2020 and 2019, respectively. During the nine months ended September 30, 2020 and 2019, we purchased property and equipment of $14,000 and $0, respectively.

Financing Activities

Net cash flows provided by financing activities were $524,965 and $0, for the nine months ended September 30, 2020 and 2019, respectively. Net cash flows provided by financing activities were $524,965 for the nine months ended September 30, 2020 and were for proceeds from convertible notes payable of $200,000 and proceeds from note payable of $324,965.

Net cash flows provided by financing activities were $0 for the nine months ended September 30, 2020.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

Our company has not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under which we have:

Critical Accounting Policies and Estimates

Critical accounting estimates are those that management deems to be most important to the portrayal of our financial condition and results of operations, and that require management’s most difficult, subjective or complex judgments, due to the need to make estimates about the effects of matters that are inherently uncertain. We have identified our critical accounting estimates which are discussed below.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 

Revenue Recognition and Unearned Revenue

Revenue is recognized in accordance with ASC 606. The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.  

Property and Equipment

Property and equipment are carried at historical cost less accumulated depreciation. Depreciation is based on the estimated service lives of the depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized. Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they are removed from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance are expensed as incurred.

The estimated useful lives of property and equipment are generally as follows:

 Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not consider it necessary to record any impairment charges during the periods ended September 30, 2020 and September 30, 2019, respectively.

 Fair value of financial instruments

The Company adopted FASB ASC 820, “Fair Value Measurements and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements which establishes a framework for measuring fair value and expands disclosure about such fair value measurements.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

The Company did not identify any other assets or liabilities that are required to be presented on the consolidated balance sheets at fair value in accordance with the accounting guidance. The carrying amounts reported in the balance sheet for cash, accounts payable, and accrued expenses approximate their estimated fair market value based on the short-term maturity of the instruments.

Share-Based Payments

Compensation cost relating to share-based payment transactions are recognized in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company 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.

Market risk is the risk of loss from adverse changes in market prices and rates. The Company's market risk arises primarily from the fact that the area in which we do business is highly competitive and constantly evolving. The market in which we do business is highly competitive and constantly evolving. We face competition from the larger and more established companies, from companies that have greater resources, including but not limited to, more money, and greater ability to expand their markets also cut into our potential customers. Many of our competitors have longer operating histories, significantly greater financial strength, nationwide advertising coverage and other resources that we do not have.

Evaluation of Disclosure Controls and Procedures

Based on their evaluation of our disclosure controls and procedures(as defined in Rule 13a-15e under the Securities Exchange Act of 1934 the "Exchange Act"), our principal executive officer and principal financial officer have concluded that as of the end of the period covered by this quarterly report on Form 10-Q such disclosure controls and procedures were not effective due to the lack of segregation of duties and lack of a formal review process that includes multiple levels of review to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms because of the identification of a material weakness in our internal control over financial reporting which we view as an integral part of our disclosure controls and procedures. The material weakness relates to the lack of segregation of duties in financial reporting, as our financial reporting and all accounting functions are performed by an external consultant with no oversight by a professional with accounting expertise. Our CEO/CFO does not possess accounting expertise and our company does not have an audit committee. This weakness is due to the company's lack of working capital to hire additional staff. To remedy this material weakness, we intend to engage another accountant to assist with financial reporting as soon as our finances will allow.

Changes in Internal Controls

Except as noted above, there have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our first quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 PART II - OTHER INFORMATION

None

Not Applicable

None

None

Not Applicable

None

ITEM 6. EXHIBITS 

  SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.