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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

EXCHANGE ACT

Commission File Number: 333-140177

XTREME FIGHTING CHAMPIONSHIPS, INC.

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 52,219,413 shares of common stock as of August 25, 2020.

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TABLE OF CONTENTS

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PART 1 FINANCIAL STATEMENTS 

XTREME FIGHTING CHAMPIONSHIPS, INC.

(FORMERLY DUKE MOUNTAIN RESOURCES, INC.)

FINANCIAL STATEMENTS

FOR THE FISCAL QUARTER ENDED JUNE 30, 2020

C O N T E N T S

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XTREME FIGHTING CHAMPIONSHIPS, INC.

(formerly Duke Mountain Resources, Inc.)

Notes to the Consolidated Financial Statements

June 30, 2020

(Unaudited)

NOTE 1 – CONDENSED FINANCIAL STATEMENTS

Extreme Fighting Championships, Inc., formerly 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 is currently a non-operating shell company.

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 March 31, 2020 and 2019, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2019 audited financial statements.  The results of operations for the period ended June 30, 2020 is not necessarily indicative of the operating results for the full year.

NOTE 2 - GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not generated any revenues and has incurred an accumulated deficit of $26,432,938 since inception. The Company has no assets, a working capital deficiency and incurred a net loss during the three months ended June 30, 2020.

These factors raise substantial doubt regarding the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's planned business. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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XTREME FIGHTING CHAMPIONSHIPS, INC.

(formerly Duke Mountain Resources, Inc.)

Notes to the Consolidated Financial Statements

June 30, 2020

(Unaudited)

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

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.

Earnings (Loss) per Share

Basic and diluted earnings (loss) per common share is calculated using the weighted average number of common shares outstanding during the period. The Company’s warrants are excluded from the computation of diluted earnings per share as they are anti-dilutive due to the Company’s losses during those periods.  

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.

Intangible Assets

Intangible assets are carried at the purchased cost less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets.

Impairment of Long-Lived Assets

Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Stock based compensation

The Company follows ASC 718 in accounting for its stock-based compensation to employees. This standard states that compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. The Company values stock-based compensation at the market price of the Company’s common stock as of the date in which the obligation for payment of service is incurred.

The Company accounts for transactions in which service are received from non-employees in exchange for equity instruments based on the fair value of the equity instrument exchanged in accordance with ASC 505-50.

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.

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XTREME FIGHTING CHAMPIONSHIPS, INC.

(formerly Duke Mountain Resources, Inc.)

Notes to the Consolidated Financial Statements

June 30, 2020

(Unaudited)

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (Continued)

Subsequent Events

The Company’s management reviewed all material events through the date the financial statements were issued for subsequent event disclosure consideration.

NOTE 4 - INCOME TAXES

Net deferred tax assets consist of the following components:

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income statutory tax rates to pretax income (loss) from continuing operations as follows:

The Company has accumulated net operating loss carryovers of approximately $1,416,000 as of June 30, 2020 which are available to reduce future taxable income. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes may be subject to annual limitations. A change in ownership may limit the utilization of the net operating loss carry forwards in future years. The tax loss carry forwards begin to expire in 2027. The fiscal years 2008 through 2019 remain open to examination by federal tax authorities and other tax jurisdictions.

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.

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XTREME FIGHTING CHAMPIONSHIPS, INC.

(formerly Duke Mountain Resources, Inc.)

Notes to the Consolidated Financial Statements

June 30, 2020

(Unaudited)

NOTE 6 – 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 six months ended June 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 7).

During the six months ended June 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 7 – 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 4.86 years.  Estimated future amortization is as follows:

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XTREME FIGHTING CHAMPIONSHIPS, INC.

(formerly Duke Mountain Resources, Inc.)

Notes to the Consolidated Financial Statements

June 30, 2020

(Unaudited)

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.

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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 OPERATIOMS

Working Capital

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Operating Revenues

Operating Expenses and Net Loss

Operating expenses for the six months ended June 30, 2020 were $5,302,059 compared with $12,000 for the six months ended June 30, 2019.  Operating expenses for the six months ended June 30, 2020 consisted of general and administrative expenses of $4,723,298 for the six months ended June 30, 2020 compared to $12,000 for the six months ended June 30, 2019 and amortization expenses of $578,761 for the six months ended June 30, 2020 compared to $0 for the six months ended June 30, 2019.

Other income (expense) for the three months ended June 30, 2020 were $0 compared with $147,928 for the three months ended June 30, 2019.  Other income (expense) for the three months ended June 30, 2020 consisted of debt forgiveness of $0 compared to $150,197 for the three months ended June 30, 2019 and interest expense of $0 compared to ($2,269) for the three months ended June 30, 2019.

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

During the three months ended June 30, 2020, the Company recorded a net loss of ($5,301,859) compared with net gain of $135,928 for the three months ended June 30, 2019.

During the six months ended June 30, 2020, the Company recorded a net loss of ($5,302,059) compared with net gain of $133,684 for the three months ended June 30, 2019.

Liquidity and Capital Resources

As at June 30, 2020, the Company's cash balance was $26,914 compared to cash balance of $0 at June 30, 2019. As of June 30, 2020, the Company's total assets were $22,598,606 compared to total assets of $0 as at June 30, 2019.

Cashflow from Operating Activities

Cashflow from Financing Activities

During the six months ended June 30, 2020 the Company received cash from financing activities of $0 as compared to $0 for the six months ended June 30, 2019.

Subsequent Developments

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.

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Going Concern

We have not attained profitable operations and are dependent upon the continued financial support from our shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from our future business. These factors raise substantial doubt regarding our ability to continue as a going concern.

Off-Balance Sheet Arrangements

We have no significant 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 stockholders.

Future Financing

The Company will consider selling securities in the future to fund operations.  There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

Critical Accounting Policies

Our consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally  accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements. A complete summary of these policies is included in the notes to our consolidated financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

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

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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 Control over Financial Reporting

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 

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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.

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