UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2015

 

☐   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

 

For the transition period from ______ to _______

 

Commission File Number 333-157565

 

STRAGENICS, INC.

(Exact name of registrant as specified in its charter)

 

Florida		46-5209647
(State of incorporation)		(I.R.S. Employer Identification No.)

 

100 Rialto Place, Suite 700. Melbourne, FL 32901

(Address of principal executive offices)

 

321-541-1216

(Registrant’s telephone number)

 

Indicate by check mark whether the issuer (1) 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 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.

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
Do not check if a smaller reporting company

 

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 CORPORATE ISSUERS

 

As of June 30, 2015 the registrant had 104,720,537 shares of common stock, par value $.0001 per share issued and outstanding.

 

 

 

STRAGENICS, INC.

 

TABLE OF CONTENTS

 

		Page
PART I.	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	4
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	22
ITEM 4.	CONTROLS AND PROCEDURES	22
PART II.	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	23
ITEM 1A.	RISK FACTORS	23
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	23
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	23
ITEM 4.	MINE SAFETY DISCLOSURE	23
ITEM 5.	OTHER INFORMATION	23
ITEM 6.	EXHIBITS	23

 

 

Special Note Regarding Forward-Looking Statements

 

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Stragenics, Inc., (formerly known as Allerayde SAB, Inc.), (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "Stragenics" refers to: (i) Stragenics, Inc., formerly Allerayde SAB, Inc., a Florida corporation, and (ii) Allerayde SAB Limited, a U.K. company that was wholly-owned by the Company.

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

STRAGENICS, INC.

 

 

FINANCIAL STATEMENTS

(UNAUDITED)

 

June 30, 2015

 

 

 

STRAGENICS, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

		June 30, 2015				December 31, 2014
ASSETS
Current Assets
Cash and equivalents		$	94,121			$	104
Prepaid expenses			16,125				-
Total Current Assets			110,246				104
Other Assets
Intellectual Property, (less accumulated amortization of $20,811)			154,189				-
Total Other Assets			154,189				-
TOTAL ASSETS		$	264,435			$	104
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Liabilities
Current Liabilities
Accounts payable and accrued expenses			122,288				139,525
Accrued interest			277,518				242,917
Convertible notes payable, net of discount of $184,614 (2014 - $0)			1,514,048				1,446,632
Derivative liability			2,660,638				372,286
Advances from officer			7,720				15,720
Loans payable			695,416				531,916
Advances from shareholder			4,500				6,000
Total Liabilities			5,282,128				2,754,996
Stockholders’ Deficit
Preferred Stock Authorized: 100,000,000 preferred shares. No shares issued and outstanding at June 30, 2015 and December 31, 2014			-				-
Common Stock, 400,000,000 shares of common stock with par value of $.0001; Issued 104,720,537 shares of common stock issued and outstanding at June 30, 2015 and (98,226,850) - December 31, 2014			10,472				9,823
Additional paid in capital			748,619				516,984
Accumulated other comprehensive loss			835				835
Accumulated deficit			(5,777,619	)			(3,110,507	)
Total Stockholders’ Deficit			(5,017,693	)			(2,582,865	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	264,435			$	172,131

 

See accompanying notes to financial statements.

 

 

STRAGENICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND

OTHER COMPREHENSIVE INCOME (LOSS)

 

		Three months ended June 30, 2015				Three months ended June 30, 2014				Six months ended June 30, 2015				Six months ended June 30, 2014
REVENUES		$	-			$	-			$	-			$	-
EXPENSES
Professional fees			15,250				1,500				25,250				5,510
Consulting fees			13,113				-				24,275				-
Compensation			15,000				-				30,000				-
Office expense			1,206				2,921				1,983				4,100
Filing and registration			14,958				1,139				15,798				2,460
Amortization of website			8,919				-				17,838				-
General and administrative			20,982				-				29,647				-
TOTAL EXPENSES			89,428				5,560				144,791				12,070
LOSS FROM OPERATIONS			(89,428	)			(5,560	)			(144,791	)			(12,070	)
OTHER INCOME (EXPENSES)
Other income			-				-				1,081				-
Interest expense			(36,335	)			(13,077	)			(60,964	)			(26,154	)
Commitment fee			(125,000	)			-				(243,331	)			-
Amortization of debt discount			(64,714	)			(4,917	)			(89,737	)			-
Gain (loss) on extinguishing debt			(624,463	)			-				(624,463	)			-
Derivative expense			-				-				-				(6,219	)
Change in fair market value of derivative liability			(946,961	)			730,333				(1,504,908	)			463,020
TOTAL OTHER INCOME (EXPENSE)			(1,797,473	)			712,339				(2,522,322	)			430,647
GAIN (LOSS) BEFORE PROVISION FOR INCOME TAXES			(1,886,901	)			706,779				(2,667,113	)			418,577
PROVISION FOR INCOME TAXES			-				-				-				-
NET GAIN (LOSS)		$	(1,886,901	)		$	706,779			$	(2,667,113	)		$	418,577
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments			-				-				-				-
TOTAL COMPREHENSIVE INCOME (LOSS)		$	(1,886,901	)		$	706,779			$	(2,667,113	)		$	418,577
NET GAIN (LOSS) PER SHARE: BASIC AND DILUTED		$	(0.018	)		$	(0.01	)		$	(0.0255	)		$	(0.00	)
TOTAL COMPREHENSIVE LOSS PER SHARE: BASIC AND DILUTED		$	(0.018	)		$	(0.01	)			(0.0255	)		$	(0.00	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED			104,720,537				89,005,255				104,720,537				89,005,250

 

See accompanying notes to financial statements.

 

 

STRAGENICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

		Six months ended June 30, 2015				Six months ended June 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period		$	(2,667,113	)		$	418,577
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization			17,838				-
Amortization of debt discount			64,714				6,219
Change in fair market value of derivative liability			2,288,352				(463,020	)
Debt Discount, net of amortization			(249,327	)			-
Changes in assets and liabilities:
Increase in prepaid expenses			(16,125	)			-
Increase (decrease) in accounts payable and accrued expenses			(17,237	)			(5,536	)
Increase in accrued interest			34,601				26,153
Net Cash Used in Operating Activities			(544,297	)			(17,607	)
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft			-				(409	)
Proceeds (Repayment) from promissory notes			175,000				5,000
Proceeds from convertible notes payable			282,750				15,000
Proceeds (Repayment) of convertible notes			(37,720	)			-
Advances (Repayment) from shareholders			(14,000	)			20
Common stock for note conversions and warrants			232,284				-
Net Cash Provided by Financing Activities			638,314				19,611
Fluctuation on foreign currency			-				-
NET INCREASE IN CASH			94,017				2,004
Cash and equivalents, beginning of period			104				-
Cash and equivalents, end of period		$	94,121			$	2,004
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest		$	-			$	-
Cash paid for income taxes		$	-			$	-

 

See accompanying notes to financial statements.

 

 

STRAGENICS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business

Stragenics, Inc., formerly known as Allerayde SAB, Inc. (the “Company” or “Stragenics”) was incorporated under the laws of the State of Florida on January 15, 2009. On February 23, 2010, the Company changed its name to Resource Exchange of America Corp. Effective April 30, 2013, the Company changed its name to Allerayde SAB, Inc. Effective April 28, 2014, the Company changed its name to Stragenics, Inc.

 

The Company’s prior business was a mobile enterprise software company aimed at improving productivity of field service organizations. Upon completion of the acquisition of assets from UTP Holdings, LLC on February 22, 2010, the Company adopted the business of UTP Holdings, LLC. The Company was then engaged in the business of recycling ferrous and nonferrous metals to customers in the United States and abroad.

 

On March 21, 2013, the Company entered into a Share Exchange Agreement with Allerayde SAB Limited. (“Allerayde”) and Mike Rhodes, the sole member of Allerayde (the “Allerayde Stockholder”) (the “Share Exchange Agreement”). This share exchange transaction constituted a reverse merger and a recapitalization of Stragenics (formerly Allerayde).  In conjunction with this reverse merger, the historical accounts of Stragenics become the historical accounts of Resource Exchange of America Corp for accounting purposes. The Company was then engaged in the business of developing and manufacturing allergy management products in the United Kingdom and other countries such as the U.S. and Canada.

 

On March 4, 2014, the Company underwent a change of control and entered into a Termination Agreement (the “Agreement”), whereby Allerayde SAB, Ltd, the Company’s subsidiary reverted to former management effective December 1, 2014, thereby reverting the subsidiary back to former management.

 

On December 1, 2014, the Company acquired BakedAmerican.com, and began new operations as an internet-based, social media, marketing and development company.

 

Accounting Basis

The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting).  The Company has adopted a December 31 fiscal year end.

 

 

STRAGENICS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Cash and Cash Equivalents

Stragenics considers all highly liquid investments with maturities of three months or less to be cash equivalents. At June 30, 2015 and December 31, 2014, respectively, the Company had $94,121 and $104 of cash, respectively.

 

Fair Value Measurement

FASB ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and prescribes disclosures about fair value measurements.

 

As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

 

The three levels of the fair value hierarchy defined by ASC 820 are as follows:

 

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

 

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

 

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

 

The valuation techniques that may be used to measure fair value are as follows:

 

Market approach - Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

 

Income approach - Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models and excess earnings method.

 

Cost approach - Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

 

The carrying value of the Company’s borrowings is a reasonable estimate of its fair value as borrowings under the Company’s credit facility have variable rates that reflect currently available terms and conditions for similar debt.

 

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

 

 

STRAGENICS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of June 30, 2105 and December 31, 2014. As required by FASB ASC 820, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

June 30, 2015		Level I				Level II				Level III				Total
Derivative liability		$	-			$	2,660,638			$	-			$	2,660,638
Total liabilities		$	-			$	5,282,128			$	-			$	5,282,128

 

December 31, 2014		Level I				Level II				Level III				Total
Derivative liability		$	-			$	372,286			$	-			$	372,286
Total liabilities		$	-			$	2,754,996			$	-			$	2,754,996

 

In addition, the FASB issued, “The Fair Value Option for Financial Assets and Financial Liabilities. This guidance expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value option for any of its qualifying financial instruments.

 

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued expenses, convertible notes payable, derivative liability, amounts due to related parties and loans payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

 

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

 

Use of Estimates

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

 

 

STRAGENICS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Revenue Recognition

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

 

Foreign Currency

Until December 1, 2014, the operations of the Company were located in England and Wales. Stragenics maintained a Great Britain Pounds bank account. The functional currency is the U.S. Dollar. Transactions in foreign currencies other than the functional currency, if any, are re-measured into the functional currency at the rate in effect at the time of the transaction. Monetary assets and liabilities denominated in Great Britain Pounds are translated into U.S. Dollars at the rate in effect at the balance sheet date. Revenue and expenses denominated in Great Britain Pounds Dollars are translated at the average exchange rate.

 

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of June 30, 2015.

 

Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.

 

Recent Accounting Pronouncements

On June 10, 2014, the Financial Accounting Standards Board ("FASB") issued update ASU 2014-10, Development Stage Entities (Topic 915).   Amongst other things, the amendments in this update removed the definition of development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from US GAAP.  In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows and shareholders’ equity, (2) label the financial statements as those of a development stage entity; (3) disclose a description of the development stage activities in which the entity is engaged and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.  The amendments are effective for annual reporting periods beginning after December 31, 2014 and interim reporting periods beginning after December 15, 2015, however entities are permitted to early adopt for any annual or interim reporting period for which the financial statements have yet to be issued.  The Company has elected to early adopt these amendments and accordingly have not labeled the financial statements as those of a development stage entity and have not presented inception-to-date information on the respective financial statements.

 

Stragenics does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow other than the pronouncement described above. 

 

 

STRAGENICS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

 

NOTE 2 – GOING CONCERN

  

The 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 incurred losses since inception, has an accumulated deficit of $5,777,619 as of June 30, 2015, has limited working capital, 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 to obtain 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 with existing cash on hand and loans from directors and or private placement of common stock.

 

NOTE 3 – DUE TO RELATED PARTIES

  

During the period ended June 30, 2015 and for the year ended December 31, 2014, the Company received advances from the President of the Company in the net amount of $7,720 and $15,720. During the period ended June 30, 2015, the Company repaid $8,000 of those advances. The advances are non-interest bearing and due on demand.

 

NOTE 4 – PROMISSORY NOTES

 

The Company has amounts due to a former officer of the Company and another company controlled by the former president totaling $431,061 as of March 31, 2015. The loans are unsecured, non-interest bearing and due on demand.

 

Effective March 18, 2010, the Company entered into a line of credit agreement with a company owned by a former officer of the Company allowing for borrowings of up to $150,000 bearing interest at 8% per annum. The line of credit is unsecured and all borrowings plus interest are due on demand. The balance on the line of credit as of June 30, 2015 is $50,300.

 

The Company has an amount due of $30,555 to an unrelated party as of June 30, 2015. The amount is unsecured, non-interest bearing and due on demand.

 

The Company has an amount due of $4,500 in advances from an unrelated party. This advance has no specific terms of repayment, is unsecured and non-interest bearing.

 

On April 1, 2015, the Company and Healthnostics, Inc., the seller of BakedAmerican.com agreed to amend the acquisition agreement between the companies whereby Healthnostics, Inc., would return 5,000,000 shares of the Company’s common stock in exchange for a promissory note payable, due on March 31, 2016 in the amount of $175,000, with an interest rate of 6%.

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE

 

(a) On February 22, 2010, the Company issued a $250,000 promissory note to a former officer of the Company. The note bears interest at 10% per annum, is unsecured, and was due on December 31, 2010. The holder may convert, at any time, any amount outstanding into shares of common stock of the Company at a conversion price per share equal to 75% of the average of the closing market price of the Company’s common stock during the five trading days immediately preceding the conversion date.

 

 

STRAGENICS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversions feature of $175,081 with an equivalent discount on the convertible debt. The debt was fully accreted as of December 31, 2011. The carrying value of the convertible debt as of June 30, 2015 is $250,000. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $335,746 as of June 30, 2015.

 

(b) On April 13, 2010, the Company entered into a $250,000 draw down promissory note agreement with Paramount Trading Company, a non-related party. Amounts drawn on this credit facility bear interest at 8% per annum, are unsecured, and were due on April 13, 2011. Effective March 31, 2014, Paramount Trading Company assigned this note, along with accrued interest to Liberty Resources Ltd., whereby the principal balance of $250,000 and accrued interest of $59,001 were reclassified into a new principal balance of $309,001. During the period ended June 30, 2015, the current debt holder, Liberty Resources, Ltd., sold portions of the note (“Liberty Note”) to various parties. As a result the conversion terms for each sale changed from the original conversion terms thereby creating new notes each of which have varying conversion terms. As of June 30, 2015, the remaining balance on the note was $138,001 and a total of $42,083 was converted by the new holders. These notes, derived from the original Liberty note are as follows:

 

Effective April 2, 2015, LG Capital LLC acquired a $50,000 interest for $50,000 in the Liberty Note with conversion terms equal to 60% of the average of the five lowest trading days in the preceding 25 trading days including to the conversion date. The new note was considered an extinguishment of the prior note and a loss on extinguishment of $138,750 was recorded. The note holder converted $10,000 plus interest of this note to common stock during the three months ended June 30, 2015. The carrying value of the convertible debt as of June 30, 2015 is $40,000. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $77,181 as of June 30, 2015.

 

Effective May 5, 2015, JDF Capital, Inc., acquired a $56,000 interest for $56,000 in the Liberty Note with conversion terms equal to 50% of the average of the three lowest trading days in the 20 days prior to and including the conversion date. The new note was considered an extinguishment of the prior note and a loss on extinguishment of $115,328 was recorded. The carrying value of the convertible debt as of June 30, 2015 is $56,000. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $207,760 as of June 30, 2015.

 

Effective May 28, 2015, Black Forest Capital Inc., acquired a $53,500, interest for $53,500 in the Liberty Note with conversion terms equal to 40% of the lowest trading price in the 20 days prior to and including the conversion date. The new note was considered an extinguishment of the prior note and a loss on extinguishment of $165,356 was recorded. The note holder converted $7,000 plus interest of this note to common stock during the three months ended June 30, 2015. The carrying value of the convertible debt as of June 30, 2015 is $46,500. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $122,353 as of June 30, 2015.

 

Effective April 30, 2015, Tangiers Investment Group, LLC, acquired a $25,000, interest for $25,000 in the Liberty Note with conversion terms equal to 50% of the lowest trading price in the 20 days prior to and including the conversion date. The new note was considered an extinguishment of the prior note and a loss on extinguishment of $93,630 was recorded. The note holder converted $13,500 plus interest of this note to common stock during the three months ended June 30, 2015. The carrying value of the convertible debt as of June 30, 2015 is $11,500. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $31,405 as of June 30, 2015.

  

(c) Effective January 31, 2005, a former officer of the Company entered into a line of credit agreement with a financial institution allowing for borrowings of up to $800,000 with annual interest at prime to be used to fund the operations of the Company. The line of credit is secured by the principal residence of the former President of the Company. Monthly interest-only payments are required. On October 21, 2010, the Company agreed to add a conversion option to the entire balance of principal and interest outstanding at any time on the line of credit. The President of the Company may elect to convert, at any time, any amount outstanding into shares of common stock of the Company at a conversion price per share equal to 75% of the average of the closing market price of the Company’s common stock during the five trading days immediately preceding the conversion date. The maturity date was December 31, 2011 and the note is now due on demand.

 

As of June 30, 2015, the outstanding balance is $788,472 (December 31, 2014 - $788,472). The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $190,274 with an equivalent discount on the convertible debt. The debt was fully accreted as of December 31, 2011.  The carrying value of the convertible debt as of June 30, 2015 is $788,472. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $1,058,963 as of June 30, 2015.

 

(d) Effective March 31, 2014, CapitalNordic Ltd., assigned two defaulted notes, plus accrued finance chafes and interest that it held to Neoventive LLC, in the collective amount of $9,200, derived from two defaulted promissory notes, dated September 10, 2013 and September 24, 2013, in the amounts of $3,000 and $5,000. The notes plus interest of $450 and $750 respectively were payable after 4 months. Upon the effectiveness of the assignment, both notes had interest at 6% and maintained the same conversion features. The holder may elect to convert, at any time, any amount outstanding into shares of common stock of the Company at $0.01 price per share.

 

 

STRAGENICS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

(e) Effective March 31, 2014, Laurag Associates S.A., assigned two defaulted notes, plus accrued interest that it held to Neoventive LLC, in the collective amount of $23,250 one dated August 31, 2012 in which the Company issued a 6% convertible note for proceeds of $20,000 to and the second dated March 12, 2013 in which the Company issued a 5% promissory note in the amount of $2,500. Upon the effectiveness of the assignment, both notes had interest at 6% and maintained the same conversion features. The holder may elect to convert, at any time, any amount outstanding into shares of common stock of the Company at a conversion price per share equal to the market price of the stock as determined by taking the average trading price of the stock over the previous 30 days.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $1,407 with an equivalent discount on the convertible debt. The debt was fully accreted as of June 30, 2015.  The carrying value of the convertible debt as of June 30, 2015 is $23,250. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $14,876 as of June 30, 2015.

 

(f) On November 16, 2012 the Company issued a 6% convertible note for assumed accounts payable of $66,709 which matured on November 16, 2013. The holder may elect to convert, at any time, any amount outstanding into shares of common stock of the Company at a conversion price per share equal to the market price of the stock as determined by taking the average trading price of the stock over the previous 30 days.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $1,410 with an equivalent discount on the convertible debt. On July 1, 2014, the conversion feature of the loan was modified from a variable conversion price to a fixed conversion price of $ 0.01 per share. As a result of the loan modification, the remaining derivative liability as of July 1, 2014 of $ 5,121 was recorded as a gain on modification of loan terms. A debt discount of $ 66,709 to recognize the value of the conversion feature, was recorded on July 1, 2014, which was fully amortized as of December 31, 2014. The carrying value of the convertible debt as of June 30, 2015 is $66,709. 

 

 

STRAGENICS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

(g) Effective January 2, 2015, the Company issued an 8% convertible note to KBM Worldwide Inc., for proceeds of $33,000 which matures on September 12, 2015. Among other terms, the holder may elect to convert, at any time after one hundred eighty days (180), any amount outstanding into shares of common stock of the Company at a conversion price per share equal to 51% of the average of the three lowest days closing market prices during the fifteen day trading period immediately preceding the conversion date. The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $45,531, with a discount on the convertible debt of $33,000 and a derivative expense of $12,531. The debt discount will be amortized over the life of the debt. The remaining discount was $11,122 of June 30, 2015. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $76,918 as of June 30, 2015. 

 

(h) Effective January 16, 2015, the Company issued a 10% convertible note to Tangiers Investment Group LLC for proceeds of $44,000 under terms of a borrowing agreement whereby the Company can borrow up to $220,000 within 270 days of execution of the agreement. The Note, with a 10% original issue discount, has interest under the Note of 10% per annum, with the principal and all accrued but unpaid interest due on or about January 16, 2016. The Note is convertible at any time at Tangier’s option into shares of the Company’s common stock at a variable conversion price of 60% of the lowest traded price during the 5 days prior to the notice of conversion, subject to adjustment and other terms as described in the Note.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $67,262, with a discount on the convertible debt of $44,000 and a derivative expense of $23,262. The debt discount will be amortized over the life of the debt. The remaining discount was $24,230 of June 30, 2015.

 

On May 15, 2015, the Company issued a 10% convertible note to Tangiers Investment Group LLC for proceeds of $13,250 under terms of the above borrowing agreement.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $9,752 with an equivalent discount on the convertible debt. The debt discount will be amortized over the life of the debt.  The derivative liability related to this note is recalculated each reporting period. The derivative liability was $127,478 as of June 30, 2015.

 

(i) On March 6, 2015, the Company issued an 8% convertible note to Vis Vires Group Inc., for proceeds of $33,000 which matures on or about December 7, 2015. Among other terms, the holder may elect to convert, at any time after one hundred eighty days (180), any amount outstanding into shares of common stock of the Company at a conversion price per share equal to 51% of the average of the three lowest days closing market prices during the fifteen day trading period immediately preceding the conversion date.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $160,997, with a discount on the convertible debt of $33,000 and a derivative expense of $127,997. The debt discount will be amortized over the life of the debt. The remaining discount was $18,578 as of June 30, 2015. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $72,601 as of June 30, 2015. 

 

(j) On April 2, 2105, the Company issued an 8% convertible note to LG Capital Funding LLC, for proceeds of $60,000 which matures on October 1, 2015. Among other terms, the holder may elect to convert, at any time after one hundred eighty days (180), any amount outstanding into shares of common stock of the Company at a conversion price per share equal to 40% of the average of the lowest trading price with a 20-day look back.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $183,317, with a discount on the convertible debt of $60,000 and a derivative expense of $123,317. The debt discount will be amortized over the life of the debt. The remaining discount was $45,041 as of June 30, 2015. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $115,369 as of June 30, 2015.

 

 

STRAGENICS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

(k) Effective May 12, 2015, The Company entered into a 10% Convertible Promissory Note and Warrant Agreement with JDF Capital Inc. In accordance with the terms of the Note with JDF Capital Inc., the Company can borrow up to $330,000, of which the Company borrowed $61,600 on January 16, 2015 and with an additional $268,400 available for additional borrowings at JDF’s discretion after the initial $61,600. Each advance principal and interest is due 12 months from the applicable funding date. Warrants, with a term of 5 years, received are equal to 100% of the common stock shares eligible for conversion on the date of the initial funding with an exercise price equal 110% of the initial conversion price. The terms of conversion, among other terms, is equal to 50% of the average of the 3 lowest reported sale prices on the common stock for the 20 trading days immediately prior to the closing date of the financing or 50% of the average of the 3 lowest reported sale prices for the 20 days prior to the conversion date of the Note. The Warrant is exercisable at $.0238 per share over a five-year period and carries a valuation cost of $83,191.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $96,258, with a discount on the convertible debt of $61,600 and a derivative expense of $34,658. The debt discount will be amortized over the life of the debt. The remaining discount was $53,149 as of June 30, 2015. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $155,928 as of June 30, 2015.

 

(l) On June 2, 2015, the Company issued an 8% convertible note to Vis Vires Group Inc., for proceeds of $33,000 which matures on or about December 31, 2015. Among other terms, the holder may elect to convert, at any time after one hundred eighty days (180), any amount outstanding into shares of common stock of the Company at a conversion price per share equal to 51% of the average of the three lowest days closing market prices during the fifteen day trading period immediately preceding the conversion date.

 

The Company was required to classify the conversion feature contained within the convertible debt as a derivative liability. As such, the Company recorded a derivative liability related to the convertible debt equal to the estimated fair value of the conversion feature of $34,297, with a discount on the convertible debt of $33,000 and a derivative expense of $1,297. The debt discount will be amortized over the life of the debt. The remaining discount was $25,544 as of June 30, 2015. The derivative liability related to this note is recalculated each reporting period. The derivative liability was $80,367 as of June 30, 2015. 

 

NOTE 6 – COMMON STOCK

 

The Company originally had an unlimited number of shares of no par value common stock.

 

On inception, the Company issued 10 shares of common stock at £1.00 per share to its founder for total cash proceeds of £10, which converted at its historical rate is $15. The Company closed a share exchange transaction effective March 23, 2013 with the shareholders of Resource Exchange of America Corp. This share exchange transaction constituted a reverse merger and a recapitalization of Allerayde.  In conjunction with this reverse merger, the historical accounts of Allerayde become the historical accounts of Resource Exchange of America Corp for accounting purposes. The shareholders of Allerayde were issued 75,872,411 shares of Resource Exchange, representing 98.97% of the issued and outstanding shares of Resource Exchange. At the time of the reverse merger there were 786,328 shares of common stock outstanding.

 

On January 31, 2013, the Company amended its Articles of Incorporation to increase the total authorized shares of common stock, par value $.0001 per share from 250,000,000 shares to 400,000,000 shares and to additionally authorize a total of 100,000,000 shares of preferred stock, par value $.0001 per share which may be issued by the Company.

 

On December 1, 2014, the Company issued 5,000,000 shares of common stock for its acquisition of BakedAmerican.com at a valuation of $175,000. On April 1, 2015, the Company and the seller agreed to amend the purchase terms of the acquisition whereby the stock issued was returned and exchanged for a promissory note with a face value of $175,000. (See Note 9 - Subsequent Events.)

 

On December 30, 2014, the Company agreed to issue 4,221,600 shares of common stock for notes payable of $21, 108 plus an agreement to cancel the balance of notes payable and accrued interest in the amount of $59,669.

 

On January 16, 2015, the Company issued 1,618,752 shares of its common stock, at $.0731 per share as part of a commitment fee under the terms of an Equity Line of Credit Agreement.

 

On April 1, 2015, Tangiers Investment Group converted $7,500 of principal into 375,000 shares of common stock.

 

On April 22, 2015, the Company issued 1,918,944 shares of its common stock, at $.0731 per share as part of a commitment fee under the terms of an Equity Line of Credit Agreement.

 

On May 19, 2015, Tangiers Investment Group converted $6,000 of principal into 647,249 shares of common stock.

 

On May 22, 2015, LG Capital converted $10,000 of principal and $83 on interest into 730,038 shares of common stock.

 

On June 15, 2015, Black Forest Capital converted $7,000 of principal into 1,944,445 shares of common stock.

 

On June 15, 2015, Tangiers Investment Group converted $11,500 of principal into 4,259,259 shares of common stock.

 

As of June 30, 2015 there were 104,720,537 shares of common stock issued and outstanding.

 

 

STRAGENICS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

 

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

The Company had entered into a lease agreement for its corporate office, which called for monthly payments in the amount of approximately $225.00 on a month-to-month basis.

 

NOTE 8 – SUBSEQUENT EVENTS

 

In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to June 30, 2015 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described above.

 

Subsequent to June 30, 2015, 104,767,648 shares of the Company’s common stock were issued to assignees holding certain amounts of the Liberty Resources, Ltd., note under specific conversion terms. These include: Tangiers Investment Group LLC converting 40,452,953 shares; LG Capital Funding LLC converting 4,336,500 shares; JDF Capital Inc., 15,944,444 shares; Black Forest Capital LLC converting 20,333,751 shares; Metropolis Capital Partners LLC converting 11,700,000 shares of common stock; and A&R Equity converting 12,000,000 shares. (See Note 5 – Convertible Notes, part (b).)

 

KBM Worldwide Inc., converted its promissory note, dated June 2, 2015 into 18,150,760 shares of the company’s common stock. As of July 21, 2105, this note is paid in full.

 

On July 1, 2015, the Company filed with the Secretary of State of Florida to amend its articles of Incorporation to increase the total authorized shares of common stock, par value $.0001 from 400,000,000 shares to 900,000,000.

 

On July 5, 2015 the Board of Directors authorized the creation of a Series A Preferred Stock from the Company’s authorized Preferred Stock, authorizing 10,000 shares. The Rights of Series A Preferred Stock, Stockholders and the Rules for Issuance:

 

Preferred Stock at the time of issuance.

 

Shares of Preferred stock may only by issued in exchange for the partial or full retirement of debt held by management, employees, consultants or those creditors that are designated, as voted upon by a majority of the Board of Directors, to receive Series A Preferred Stock. The number of Shares of Preferred stock to be issued to each qualified person (i.e. management, employee, consultant or creditor of the company), holding a Note shall be determined by the following formula: number of U.S. dollars = number of shares of Series A of debt retired Preferred stock to be issued (e.g.: US $ 1 of debt retired = 1 share of Series A Preferred Stock). If at least one share of Series A Preferred Stock is issued and outstanding, then the total aggregate issued shares of Series A Preferred Stock at any given time, regardless of their number, have voting rights equal to 75% of the number of shares of Common Stock issued and outstanding at the time of any vote of shareholders.

 

Voting Rights of Series A Preferred Stock.

 

Each individual share of Series A Preferred stock shall have the voting rights equal to 75% of the number of shares of Common Stock issued and outstanding at the time of any vote of shareholders, divided by the number of shares of series A Preferred Shares which are issued and outstanding at the time of the vote.

 

On July 10, 2015 the Company issued 10,000 shares of Series A Preferred Stock, $.0001 par value to its President in exchange for $10,000 in unpaid compensation.

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

 

FORWARD-LOOKING STATEMENTS

 

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

 

Business Overview

 

The Company is a holding company that acquired a new operating asset, BakedAmerican.com on December 1, 2014 along with the related domain names www.bakedamerican.com, www.bakedamerican.org, www.bakedamerica.com, www.bakedamerica.org, www.bakedamericantv.com and www.bakedamerican.tv. BakedAmerican is a recreational cannabis consumer website providing product information, dispensary information and locations, news, strain reviews and resources for marijuana legal states. The site will allow consumers to identify, rate and explore legal marijuana dispensaries and compare experiences and products. The news channel, via RSS information sources, provides news feeds for marijuana related information focused on nationally important developments, impact on state legislation, new trends and new legislation. The website is still under construction, has not gone “live” and there are no consumers/users yet for BakedAmerican.com, nor has it yielded any revenue.

 

Sales and Marketing

 

We are following a similar model to other information/directory portal sites, in that we recognize that consumers are strongly influenced by, and make decisions based upon, local directory listings and advertising and that local advertising is moving toward online research conducted by consumers and as such, local businesses are spending more advertising dollars on media and online sources. Our approach further includes utilizing state of the art techniques and tools to optimize Internet Marketing to improve our on-line exposure to interested visitors and consumers.

 

We plan to generate revenue primarily through the sale of online display advertising on our website to businesses local to the areas we cover, initially the Colorado and Washington state geographies, as well as developing a marketing program for sector business entities to have the opportunity to place themselves prominently within the BakedAmerican local directory for increased visibility.

 

Channels

 

We plan to add sales efforts, including direct sales in our targeted markets and continue research on revenue generating offerings for our website.

 

 

Marketing and Public Relations

 

We plan to market our website through extensive Internet Marketing, direct marketing and sales. 

 

Industry Background

 

The Market for Medical Marijuana and Consumer Cannabis 

 

Overview

 

Twenty three states and the District of Columbia have adopted laws that exempt patients who use medical marijuana, under a physician’s prescription and supervision, from state criminal penalties. Four states; Colorado, Washington, Oregon, Alaska, and the District of Columbia, have legalized recreational use of cannabis.

 

Market Growth

 

As a result of the ongoing legalization momentum, the market size has grown from approximately $1.43 billion in 2013 to $2.34 billion in 2014 according to a report published by The Huffington Post. Further, according to a recent report from GreenWave Advisors, a research and advisory firm that serves the emerging marijuana industry in the U.S., if the federal government doesn't end prohibition in all 50 states and the District of Columbia and the trajectory of state legalization continues on its current path, with more, but not all, states legalizing marijuana in some form, the industry in 2020 would be worth $21 billion. If the federal government does end prohibition, the industry would be worth $35 billion in 2020, GreenWave Advisors states.

 

Additionally, we believe that recreational marijuana sales will soon outpace medical sales, as exemplified by the fact that according to Colorado State Department of Revenue data, beginning in July, 2014, recreational marijuana sales in Colorado exceeded medical sales for the first time. Such recreational marijuana sales trending will create an expanding market for ancillary informational products and services, which we target.

 

Competition

 

The largest consumer review site Yelp is the most significant competition for any online review website, including medical marijuana and consumer cannabis industries and can affect any company in the market. However, to date Yelp has limited involvement in this market segment. Others, such as leafly.com and weedmaps.com, have significant penetration into the market and competing with these companies will require us to provide a relevant and quality experience, in addition to providing access to vital and usable information. Leafly.com has indicated that they received over 2.5 million unique visitors per month and recorded revenue of close to $4 million in 2013. According to a Pitchbook report, Privateer Holdings — the Seattle-based company behind Leafly, — raised its last round of capital of $75 million at a $415 million pre-money valuation. According to Inc.com, Weedmaps.com has 65 employees and $30 million in annual revenue.

  

Intellectual Property

 

Our intellectual property portfolio is an important aspect for our company. We currently own BakedAmericam.com and the related domain names www.bakedamerican.com, www.bakedamerican.org, www.bakedamerica.com, www.bakedamerica.org, www.bakedamericantv.com and www.bakedamerican.tv, which we are researching for trademark applicability. We plan to use a combination of trademark, copyright trade secret and other intellectual property laws, and confidentiality agreements to protect our intellectual property, as the case may be. Despite any precautions we may take it may be possible for third parties to obtain and use, without consent, intellectual property that we own.

 

 

RESULTS OF OPERATIONS

 

Working Capital

 

		June 30,				December 31,
		2015$				2014$
Current Assets			110,246				104
Current Liabilities			5,282,128				2,754,996
Working Capital Deficit			(5,171,882	)			(2,754,892	)

 

Cash Flows

 

		Six months ended June 30, 2015 $				Six months ended June 30, 2014 $
Cash Flows (used in) Operating Activities			(544,297	)			(17,607	)
Cash Flows provided by Investing Activities			-				-
Cash Flows provided by Financing Activities			638,314				19,611
Exchange rate effect on cash			-				-
Net Increase in Cash During Period			94,017				2,004

 

For the three-month period ended June 30, 2015

 

Operating Revenues

 

Operating revenues for the three-month period ended June 30, 2015 were $nil.

 

Operating revenues for the three-month period ended June 30, 2014 were $nil.

 

Operating Expenses and Net Loss

 

Operating expenses, including other income (expenses), for the three months ended June 30, 2015 were $1,886,901, which is comprised of professional fees of $15,250, consulting fees of $13,113, executive compensation of $15,000, office expenses of $1,206, travel expenses of $960, filing and registration fees of $14,958, general and administrative costs of $16,022, financing commissions of $4,000, interest expense of $36,335, amortization of acquired website of $8,919, amortization of debt discount costs of $64,714, line of credit commitment fees of $125,000 a loss on the extinguishing of debt totaling $624,463 and an increase in cost associated with the fair market value of the derivative liability of $946,961.

 

Operating expenses, including other income (expenses), for the three months ended June 30, 2014 were $23,554, which is comprised of professional fees of $1,500, office expenses of $2,921, filing and registration fees of $1,139, interest expense of $13,077 and amortization of debt discount of $4,917. These expenses were offset by a gain from the change in fair market value of the derivative liability of $730,333.

  

For the six-month period ended June 30, 2015

 

Operating Revenues

 

Operating revenues for the six-month period ended June 30, 2015 were $nil.

 

Operating revenues for the six-month period ended June 30, 2014 were $nil.

 

Operating Expenses and Net Loss

 

Operating expenses, including other income (expenses), for the six months ended June 30, 2015 were $2,667,113, which is comprised of professional fees of $25,250, consulting fees of $24,275, executive compensation of $30,000, office expenses of $1,983, travel expenses of $3,838, filing and registration fees of $15,798, financing commissions of $24,278, general and administrative expense of $1,531, interest expense of $60,964, amortization of acquired website of $17,838, amortization of debt discount costs or $89,737, line of credit commitment fees of $243,331, a loss on extinguishing of debt totaling $624,463 and an increase is costs associated with the fair market value of the derivative liability of $1,504,908, partially offset by other income of $1,081.

 

Operating expenses, including other income (expenses), for the six months ended June 30, 2014 were $44,443, which is comprised of professional fees of $5,510, office expenses of $4,100, filing and registration fees of $2,460, interest expense of $26,154 and amortization of debt discount of $6,219. These expenses were offset by a gain from the change in fair market value of the derivative liability of $463,020.

 

 

Liquidity and Capital Resources

 

As of June 30, 2015 and December 31, 2014, the Company’s cash balance was $94,121 and $104, respectively.  As of June 30, 2015, the total asset balance was $264,435.

 

As of June 30, 2015, the Company had total liabilities of $5,282,128 compared with total liabilities of $2,754,996 as of December 31, 2014. The increase in total liabilities is mainly attributed to an increase in derivative liabilities, along with increases in convertible notes payable and accrued interest.

 

As of June 30, 2015, the Company had a working capital deficit of $5,171,882 compared to a deficit of $2,754,892 as of December 31, 2014.

 

Cash flows from Operating Activities

 

During the period ended June 30, 2015, the Company used cash of $544,297 from operating activities compared to $17,607 of cash used by operating activities during the period ended June 30, 2014.

 

Cash flows from Investing Activities

 

During the period ended June 30, 2015, the Company used $nil of cash from investing activities compared to $nil for the period ended June 30, 2014.

 

Cash flows from Financing Activities

 

During the period ended June 30, 2015, the Company had net Financing Activities of $638,314, consisting of a $175,000 note issued for an asset acquisition, $282,750 of cash from note proceeds, repayment of $14,000 in prior debt, and net repayment of convertible notes of $37,720, common stock and warrant issuances of $232,284, as compared to $19,611 in net note proceeds for the period ended June 30, 2014.

 

Going Concern

 

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

 

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 Financings

 

We will continue to rely on debt and equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. 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 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 United States 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 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 financial statements. A complete summary of these policies is included in the notes to our 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.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of September  30, 2013, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.

 

Changes in Internal Control over Financial Reporting

 

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.

 

The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting. 

 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On January 16, 2015, and on April 22, 2015 the Company issued 1,618,752 and 1,918,944 shares of its common stock, at $.0731 and $.07 per share, respectively as a commitment fee under the terms of an Equity Line of Credit Agreement.

 

On April 1, 2015, Tangiers Investment Group converted $7,500 of principal into 375,000 shares of common stock.

 

On May 19, 2015, Tangiers Investment Group converted $6,000 of principal into 647,249 shares of common stock.

 

On May 22, 2015, LG Capital converted $10,000 of principal and $83 on interest into 730,038 shares of common stock. On June 15, 2015, Black Forest Capital converted $7,000 of principal into 1,944,445 shares of common stock. On June 15, 2015, Tangiers Investment Group converted $11,500 of principal into 4,259,259 shares of common stock.

 

Subsequent to June 30, 2015, 104,767,648 shares of the Company’s common stock were issued to assignees holding certain amounts of the Liberty Resources, Ltd., note under specific conversion terms. These include: Tangiers Investment Group LLC converting 40,452,953 shares; LG Capital Funding LLC converting 4,336,500 shares; JDF Capital Inc., converting 15,944,444 shares; Black Forest Capital LLC converting 20,333,751 shares; Metropolis Capital Partners LLC converting 11,700,000 shares of common stock; and A&R Equity converting 12,000,000 shares.

 

KBM Worldwide Inc., converted its promissory note, dated June 2, 2015 into 18,150,760 shares of the company’s common stock. As of July 21, 2105, this note is paid in full.

  

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURE

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6.  EXHIBITS

 

Exhibit Number		Description of Exhibit		Filing Reference
31.01		Certification of Principal Executive and Financial Officer Pursuant to Rule 13a-14.		Filed herewith.
32.01		CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act.		Filed herewith.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

* The XBRL-related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	STRAGENICS, INC.
Dated:  August 31, 2015	By:	/s/ Alan W. Grofe
		Alan W. Grofe
		Title: President, Chief Executive Officer, Secretary & Treasurer

 

 

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