UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2016.

or

[  ]

Transition Report Pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________________ to ______________________.

Commission file number: _____________________

ELITE GROUP INC.

(Exact name of registrant as specified in its charter)

f/k/a Elite Books, Inc.

Nevada	32-0415962
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

4760 Preston Rd,#244-114

Frisco, Texas 75034

 (Address of principal executive offices) (zip code)

(469) 777-3370

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  [X]  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.

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

Applicable Only to Issuer Involved in Bankruptcy Proceedings During the Preceding Five Years.  N/A

Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes[ X ] No[ ]

Applicable Only to Corporate Registrants

Indicate the number of shares outstanding of each of the issuer s classes of common stock, as of the most practicable date: As of January 18, 2017, there were 44,159,177 shares of Common Stock issued and outstanding.

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PART 1	FINANCIAL  INFORMATION
Item 1	Financial Statements (Unaudited)
	Balance Sheets as of September 30, 2016 and March 31, 2016	3
	Statements of Operations for the three and six months ended September 30, 2016 and 2015	4
	Statements of Cash Flows for the three and six months ended September 30, 2016 and 2015	5
	Notes to Financial Statements	6
Item 2.	Management ’ s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	18
PART II.	OTHER  INFORMATION
Item 1	Legal Proceedings	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3	Defaults Upon Senior Securities	18
Item 4	Removed and Reserved	18
Item 5	Other Information	18
Item 6	Exhibits	19
	Signatures	20

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ELITE GROUP INC. F/K/A Elite Books, Inc. BALANCE SHEETS (Unaudited)
		September 30, 2016		March 31, 2016
ASSETS
Current Assets
Cash		$ 226		$ 17
Prepaid expenses and other assets		-		-
TOTAL CURRENT ASSETS		226		17
Fixed assets		24,000		24,000
Financing Fees, net of accumulated amortization of $100,017 and $34,963 as of September 30, 2016 and March 31, 2016, respectively		3,303		61,857
Other		20,500
TOTAL ASSETS		$ 48,029		$ 85,874
LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses		$ 25,209		$ 42,261
Accrued officer salary		55,010		15,000
Advances, related party		18,334		4,894
Convertible Debenture and accrued interest as of September 30, 2016 and March 31, 2016, respectively		642,560		523,833
Derivative liability		694,554		-
TOTAL LIABILITIES		1,435,667		585,988
SHAREHOLDERS’ DEFICIT
Common Shares, 75,000,000 shares authorized, 27,449,052 and 3,014,749 shares issued and outstanding as of September 30, 2016 and March 31, 2016, respectively		27,449		3,014
Common stock payable		245,808		15,343,813
Discount on common stock		(407,800)		(390,500)
Additional Paid In Capital		15,769,571		368,136
Accumulated Deficit		(17,022,666)		(15,824,577)
TOTAL SHAREHOLDERS’ DEFICIT		(1,387,638)		(500,114)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT		$ 48,029		$ 85,874
The accompanying notes are an integral part of these financial statements.

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ELITE GROUP INC. F/K/A Elite Books, Inc.    STATEMENTS OF OPERATIONS (Unaudited)

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

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ELITE GROUP INC. F/K/A Elite Books, Inc.    STATEMENTS OF CASH FLOWS (Unaudited)
		For the Six months Ended September 30, 2016		For the Six months Ended September 30, 2015
OPERATING ACTIVITIES
Net loss		$ (1,198,089)		$ (3,976)
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of Financing costs		65,054		-
Stock based compensation		101,995		-
Stock issued for services		22,500		-
Amortization of original issued discount interest		5,425		-
Amortization of debt discount		32,856		-
Change in derivative liability		515,210		-
Debt discount feature in excess of derivative liability at issuance		178,498		-
Loss on extinguishment of debt		68,814		-
Changes in operating assets and liabilities:
Increase accounts payable		38,949		1,000
Increase accrued officer salary		40,010		-
Increase in accrued interest		44,547		-
Net cash used in operating activities		(84,231)		(2,976)
FINANCING ACTIVITIES
Proceeds from Bank overdraft		-		87
Proceeds from Convertible Debentures		77,500		-
Financing costs		(6,500)		-
Loans from related party		13,440		-
Net cash provided by financing activities		84,440		87
NET INCREASE (DECREASE) IN CASH		209		(2,888)
CASH
Beginning of period		17		2,888
End of period		$ 226		$ -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid		$ -		$ -
Income taxes paid		$ -		$ -
The accompanying notes are an integral part of these financial statements.

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ELITE GROUP, INC.

F/K/A Elite Books, Inc.

Notes To The Unaudited Financial Statements

For the Six months ended September 30, 2016

NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS

Elite Group Inc. (the “Company”) is a corporation, registered in the State of Nevada on May 21, 2013. We are a company at its start up stage. Our business intention was to sell books utilizing the internet, and grow customer base by selling unique editions of books. Currently, we plan to acquire water properties for the oilfield service sector. Management specializes in the acquisition of assets relating to the management of oilfield water used in upstream oil and gas operations. Management's objective is to acquire and consolidate water processing assets in prolific oil and gas exploration areas. Management believes it will accomplish its goal to maximize shareholder value through strategic acquisitions, effective business model design and economies of scale to a fragmented industry. The Company will control the entire process from wellhead to the final destination and use the most environmental friendly practices in all aspects of our operations to protect and conserve the environment for future generations.

As a result of a private transaction, on January 26, 2016, the control block of stock of this company, represented by 2,000,000 shares of common stock, were cancelled by Vesna Pesic, and 2,020,000 shares of common stock were issued to Terrence Tecco, and a change of control of the Company occurred.

On July 22, 2016, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) that had the effect of changing the name of the corporation to Elite Group, Inc. and designating 74,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Company’s board of directors.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.

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 calendar year end.

Cash and Cash Equivalents

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximate their fair values based on the short-term maturity of these instruments. The carrying amount of the Company’s promissory note obligations approximate fair value, as the terms of these notes are consistent with terms available in the market for instruments with similar risk.

 

We account for our derivative financial instruments, consisting solely of certain stock purchase warrants that contain non-standard anti-dilutions provisions and/or cash settlement features, and certain conversion options embedded in our convertible instruments, at fair value using level 3 inputs. We determine the fair value of these derivative liabilities using the Black-Scholes option pricing model when appropriate, and in certain circumstances using binomial lattice models or other accepted valuation practices.

 

When determining the fair value of our financial assets and liabilities using the Black-Scholes option pricing model, we are required to use various estimates and unobservable inputs, including, among other things, contractual terms of the instruments, expected volatility of our stock price, expected dividends, and the risk-free interest rate. Changes in any of the assumptions related to the unobservable inputs identified above may change the fair value of the instrument. Increases in expected term, anticipated volatility and expected dividends generally result in increases in fair value, while decreases in the unobservable inputs generally result in decreases in fair value.

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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 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

 

Revenue Recognition

Revenue will be recognized when it is realized or realizable and earned.  Specifically, revenue will be recognized when all of the following criteria are met: (1) Persuasive evidence of an arrangement exists; (2) Service has occurred, customer acceptance has been achieved; (3) Our selling price to the buyer is fixed and determinable; and (4) Collection is reasonably assured.  The Company recognizes revenue when services have been provided and collection is reasonably assured.

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.

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 share equivalents outstanding as of September 30, 2016.

Comprehensive Income

The Company has established standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose this information on its Statement of Shareholders’ Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. The Company has not had any significant transactions that are required to be reported in other comprehensive income.

Recent Accounting Pronouncements

In February 2016, FASB issued ASU-2016-02, "Leases (Topic 842)."  The guidance requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. For finance leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; interest on the lease liability will be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income; and repayments of the principal portion of the lease liability will be classified within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; a single lease cost will be recognized, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and all cash payments will be classified within operating activities in the statement of cash flows.   Under Topic 842 the accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments in Topic 842 are effective for the Company beginning January 1, 2019, including interim periods within that fiscal year. The Company is currently evaluating the impact of adopting this standard.

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In January 2016, the Financial Accounting Standards  Board ("FASB"),  issued Accounting  Standards Update ("ASU")  2016-01, "Financial  Instruments-Overall (Subtopic 825-10): Recognition  and Measurement of Financial Assets and Financial Liabilities," which amends the guidance in U.S. generally accepted accounting principles on the classification  and measurement  of financial instruments.  Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments.  In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and are to be adopted by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this standard.

In  November  2015,  the  FASB  issued  ASU  2015-17,  "Income  Taxes  (Topic  740):  Balance  Sheet  Classification   of  Deferred  Taxes,"  which  simplifies  the presentation  of deferred income taxes by requiring that deferred tax liabilities  and assets be classified as noncurrent in a classified statement of financial position. This ASU is effective for financial statements issued for annual periods beginning after December 16, 2016, and interim periods within those annual periods. The adoption of this standard will not have any impact on the Company's financial position, results of operations and disclosures.

NOTE 3 - GOING CONCERN

The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. The Company currently has limited working capital, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.

 

Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.

NOTE 4 - CONVERTIBLE PROMISSORY NOTES PAYABLE

 

Convertible promissory notes, including accrued interest, at September 30, 2016 and March 31, 2016 are as follows:

 

		September 30, 2016				March 31, 2016
TCA Global Fund, Inc., including accrued interest of $66,000 as of September 30, 2016			$ 566,000				$ 523,833
LG Capital Funding, LLC., including accrued interest of $2,382, net of debt discount of $27,221 and original issue discount interest of $7,184 as of September 30, 2016			49,377				-
Mammoth Corporation, net of debt discount of $19,325 and original issue discount interest of $5,792 as of September 30, 2016			27,183				-
Convertible promissory note payable, net			$ 642,560				$ 523,833

TCA Global Master Credit Fund, L.P.

On January 26, 2016, the Company issued the Convertible Note in favor of TCA Global Master Credit Fund, L.P. ("TCA"). The maturity date of the Convertible Note was June 18, 2016, and the Convertible Note bears interest at a rate of sixteen and one-half percent (16.5%) per annum. The Convertible Note is convertible, at TCA's option upon an event of default, into shares of the Company’s common stock, par value $0.001 per share (the "Common Stock") at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the date of conversion. The Convertible Note may be prepaid in whole or in part at the Company’s option without penalty.

 

Furthermore, the Company shall pays $2,000 on the first day of each third month during the term. The fee shall increase by $500 for each subsequent line of credit increase with a cap of $2,500.

At any time and from time to time while this Convertible Note is outstanding, the principal and accrued interest may be, at the sole option of TCA upon an Event of Default, convertible into shares of the Company's common stock.  The note is convertible into shares of common stock at a price equal to a variable conversion price of eighty-five percent (85%) of the volume-weighted averages the five (5) days preceding the date of conversion.  

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The balance as of September 30, 2016 amount to $566,000 comprised of principal balance amounted to $500,000 and accrued interest of $66,000,

As of September 30, 2016, the six-month term of the agreement has expired and the obligations continues to be outstanding which is a nonpayment of the obligation of the Senior Secured Revolving Credit Facility dated December 18, 2015.

LG Capital Funding, LLC.

On April 19, 2016, the Company entered into a convertible note payable with LG Capital Funding, LLC. The $40,700 note payable includes $3,700 of original issuance discount and bears interest at a 8% per annum interest rate. The note matures on April 19, 2017 and may only be repaid within 180 days of issuance date with prepayment penalties ranging from 18% to 48% of principal. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty percent (60%) of the volume-weighted averages the twenty (20) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $6,501 and $2,561 during the period ending September 30, 2016, respectively. The balance as of September 30, 2016 amount to $31,057 comprised of principal balance amounted to $40,700 and accrued interest of $1,463, and net of remaining debt discount of $7,967 and original issue discount of $3,139, respectively.  

On June 19, 2016, the Company entered into a convertible note payable with LG Capital Funding, LLC. The $40,700 note payable includes $3,700 of original issuance discount and bears interest at a 8% per annum interest rate. The note matures on June 19, 2017 and may only be repaid within 180 days of issuance date with prepayment penalties ranging from 18% to 48% of principal. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty percent (60%) of the volume-weighted averages the twenty (20) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $7,879 and $1,655 during the period ending September 30, 2016, respectively. The balance as of September 30, 2016 amount to $18,320 comprised of principal balance amounted to $40,700 and accrued interest of $919, and net of remaining debt discount of $19,254 and original issue discount of $4,045, respectively.  

Mammoth Corporation

On November 18, 2015, the Company entered into a convertible note payable with Mammoth Corporation. The $17,300 note payable note is due upon the Company closing a debt or equity transaction in excess of $100,000 and no further interest shall accrue as long as the note is not in default. The note is due on demand and the default rate is 18% per annum interest. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of market price. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount in the amount of $14,937 during the period ending September 30, 2016, respectively. The balance as of September 30, 2016 amount to $14,937 comprised of principal balance amounted to $17,300 net of remaining debt discount of $2,363.  

On July 29, 2016, the Company entered into a convertible note payable with Mammoth Corporation. The $27,500 note payable includes $6,000 of original issuance discount. The note is due upon the Company closing a debt or equity transaction in excess of $100,000 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the issuance of 300,000 shares of the Company common stock issued on August 2, 2016. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of market price. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $3,538 and $1,208 during the period ending September 30, 2016, respectively. The balance as of September 30, 2016 amount to $4,746 comprised of principal balance amounted to $27,500 net of remaining debt discount of $16,962 and original issue discount of $5,792, respectively.  

On September 28, 2016, the Company received an advance of $7,500 from Mammoth Corporation in conjunction with the October 28, 2016 convertible note agreement (See note  8).

NOTE 5 - RELATED PARTIES

Advances

From time to time, the Company has received advances from certain of its officers and shareholders to meet short-term working capital needs. For the period ended September 30, 2016 and March 31, 2016, a total of $18,334 and $4,100 advances from related parties is outstanding, respectively. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

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Officer Agreements

On January 28, 2016, the Company entered into an employment agreement, effective February 15, 2016, with the Company's Chief Executive Office whereby the Company provides for compensation of $10,000 per month. A total salary of $60,000 and $0 was  expensed during the six months ended September 30, 2016 and 2015, respectively. The total balance due to the Chief Executive Officer for accrued salaries at September 30, 2016 and March 31, 2016, was $55,010 and $15,000, respectively. Furthermore, the Company agreed to issued the Chief Executive Officer twenty (20) million shares of common stock valued at $15,200,000 recorded as common stock payable at March 31, 2016 and issued the shares on August 2, 2016 (see Note 5).

NOTE 6 – EQUITY

 

Common shares

 

The Company has authorized 750,000,000 common shares as of September 30, 2016 and March 31, 2016 and the Company had 2,874,999 and 2,799,999 common shares issued and outstanding, respectively.    The common shares entitle the holder thereof to one vote per share on all matters coming before the shareholders of our company for a vote.

On July 22, 2016, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) that had the effect of changing the name of the corporation to Elite Group, Inc. and designating 74,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Company’s board of directors.

On July 14, 2016, the Company entered into a Settlement Agreement and Stipulation (the “Settlement Agreement”) with Rockwell Capital Partners, Inc.  (“Rockwell”), pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $56,000 (the “Settlement Amount”) of past-due obligations and accounts payable of the Company.  Rockwell purchased the obligations and accounts payable from certain vendors of the Company. In the six months ending September 30, 2016, the Company issued 4,359,333 Settlement shares to Rockwell to reduce the $56,000 outstanding liability.  (See Note 7.)

In conjunction with the settlement agreement, the Company issued 75,000 shares of common stock at a fair market value of $22,500 to Rockwell for fees related to the Settlement Agreement.

On August 2, 2016, the Company issued 20,000,000 shares of common stock to the Company's CEO in accordance with the employment agreement dated January 28, 2016. The Company previously accrued the share issuance as a common stock payable at March 31, 2016.

NOTE 7 – FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Disclosures about fair value of financial instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of September 30, 2016, the amounts reported for cash, accrued interest and other expenses, notes payables, and derivative liability approximate the fair value because of their short maturities.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

 

	●	Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
	●	Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
	●	Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

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We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at September 30, 2016:

 

		Total				(Level 1)				(Level 2)				(Level 3)
Liabilities
Derivative and warrant liability			-				-				-				694,554
Total liabilities measured at fair value			$ -				$ -				$ -				$ 694,554

 

The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:

 

Beginning balance as of March 31, 2016			$ -
Fair value of derivative liabilities issued			476,781
Reduction for conversions			(78,556)
Loss on change in derivative liability			296,329
Ending balance as of September 30, 2016			$ 694,554

The following tables set forth a description of the financial instruments classified as derivative liabilities as of September 30, 2016 and the assumption used to value the instruments.

 

Convertible Debentures

 

The derivative liabilities related to the embedded conversion feature were valued using the Black-Scholes option valuation model and the following assumptions on the following dates:

 

		September 30, 2016
						Embedded Conversion Feature
Risk free interest rate							0.37% to 0.62	%
Expected volatility (peer group)							89.96% to 265.77	%
Expected life (in years)							0.5 to 1.00
Expected dividend yield							-
Number outstanding							38,198,126

NOTE 8— COMMITMENTS AND CONTINGENCIES

The Company neither owns nor leases any real or personal property. An office space has been leased on a month by month basis.

The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

Consulting Agreements

 

On December 18, 2015, the Company entered into an advisory services agreement with TCA Global Master Fund (“Consultants”) for investment banking services. In consideration, the Company shall issue the Consultant $250,000 in the form of restricted shares of the Company common stock. The issuance of shares are subject to an anti-dilution share issuances to the extent the cash proceeds from the share issuances are inadequate to satisfy the $250,000 fee. The Company issued 139,750 shares of common stock at closing valued at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the agreement date. As of September 30, 2016, an additional issuance of 8,193,613 shares with a fair market value of $245,808 are required to satisfied the advisory agreement whereby an additional financing costs has been recorded to common stock payable.  The Company recorded $101,995 of stock-based financing costs for the six months ended September 30, 2016.

Settlement Agreement with Rockwell Capital Partners

On July 14, 2016, the Company entered into a Settlement Agreement and Stipulation (the “Settlement Agreement”) with Rockwell Capital Partners, Inc.  (“Rockwell”), pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $56,000 (the “Settlement Amount”) of past-due obligations and accounts payable of the Company.  Rockwell purchased the obligations and accounts payable from certain vendors of the Company.

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On July 14, 2016, the Circuit Court of the Twelfth Judicial Circuit for Manatee County, Florida (the “Manatee Court”), entered an order (the “Rockwell Order”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), in accordance with a stipulation of settlement, pursuant to the Settlement Agreement between the Company and Rockwell. The Company issued 4,359,333 Settlement shares to Rockwell to reduce certain outstanding liabilities through September 30, 2016 resulting in a loss on debt extinguishment of $68,814.

NOTE 9 — SUBSEQUENT EVENTS

In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to September 30, 2016 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 those specified below.

TCA Convertible Debenture Agreement

As of September 30, 2016, the six-month term of the agreement has expired and the obligations continues to be outstanding which is a nonpayment of the obligation of the Senior Secured Revolving Credit Facility dated December 18, 2015 (see Note 3).

Mammoth Corporation Convertible Debenture Agreement

On September 28, 2016, the Company entered into a convertible note payable with Mammoth Corporation. The $27,300 note payable includes $11,760 of original issuance discount. The note payable includes advances to the Company of $7,500 on September 28, 2016 and additional advances of $8040 in October 2016.  The note is due upon the Company closing a debt or equity transaction in excess of $100,000 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the issuance of 300,000 shares of the Company common stock.

On October 28, 2016, the Company entered into a  $68,494 convertible note payable with Mammoth Corporation. The note payable is a balance of $62,494 of principal and accrued interest assigned from the April 29, 2016 LG Capital Funding, LLC note payable and   includes $6,250 of original issuance discount. The note is due upon the Company closing a debt or equity transaction in excess of $100,000 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest.

Settlement Agreement with Rockwell Capital Partners

On November 11, 2016, the Company entered into a Settlement Agreement and Stipulation (the “Settlement Agreement”) with Rockwell Capital Partners, Inc.  (“Rockwell”), pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $49,500 (the “November 2016 Settlement Amount”) of past-due obligations and accounts payable of the Company.  Rockwell purchased the obligations and accounts payable from certain vendors of the Company.

On November 12, 2016, the Circuit Court of the Twelfth Judicial Circuit for Manatee County, Florida (the “Manatee Court”), entered an order (the “Rockwell Order”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), in accordance with a stipulation of settlement, pursuant to the November 2016 Settlement Agreement between the Company and Rockwell.

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FORWARD LOOKING STATEMENTS

Statements made in this Form 10-Q that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We  wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

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

Business in general

Elite Group Inc. (the “Company”) was formed in the State of Nevada on May 21, 2013. On January 26, 2016, as a result of a private transaction, whereby 2,000,000 shares of common stock, has been cancelled by the former CEO and 2,020,000 shares of common stock have been issued to Terrence Tecco, a change of control of the Company occurred.

On July 22, 2016, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation that had the effect of changing the name of the corporation to Elite Group, Inc. (previously Elite Books, Inc.) and designating 74,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Company’s board of directors.

  

General strategy

The Company plans to acquire water properties for the oilfield service sector. Management specializes in the acquisition of assets relating to the management of oilfield water used in upstream oil and gas operations. Management's objective is to acquire and consolidate water processing assets in prolific oil and gas exploration areas. Management believes it will accomplish its goal to maximize shareholder value through strategic acquisitions, effective business model design and economies of scale to a fragmented industry. The Company will control the entire process from wellhead to the final destination and use the most environmental friendly practices in all aspects of our operations to protect and conserve the environment for future generations.

CURRENT BUSINESS OPERATIONS

The Company plans to concentrate its development efforts in the Eagle Ford Formation in South Texas.  We believe such opportunities exist in the United States with the recent improvements in water disposal. We have only recently begun our planned business operations. To date our operations have primarily been devoted to forming the entity and developing our business plan. We have several properties under contract and have completed most of the financing for these acquisitions.

 

 

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Results of Operations

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

Three Month Period Ended September 30, 2016 Compared to Three Month Period Ended September 30, 2015.

Net Losses

Our net loss for the three months ended September 30, 2016 was $709,000 compared to a net loss of $1,120, during the three months ended September 30, 2015. Our loss was attributable to financing and administrative costs and professional fees incurred compared to nominal business activity in the prior year.

This change in net loss was primarily the result of the following:

Revenue

We recognized $0 of revenue during the three months ended September 30, 2016 compared to $100 of revenue during the three months ended September 30, 2015.  The decrease in revenue was attributable to limited resources to maintain revenue.

Operating expenses

We incurred operating expenses of $38,894 during the three months ended September 30, 2016 compared to $1,220 of operating expenses during the three months ended September 30, 2015. The primary expense in the three months ended September 30, 2016 was $30,000 of salary expense to our Chief Executive Officer in accordance with an employment agreement dated January 26, 2016. Other operating expenses consisted of general and administrative fees of $8,894 in the three months ended September 30, 2016 compared to $1,220 in the three months ended September 30, 2015 related to office, compliance and professional fees.

Other Income (Expense)

We incurred interest expense of $183,349 and financing costs of $29,135 related to our convertible debenture in the three months ended September 30, 2016. Additionally, the change in fair value of the Company’s derivative instruments amounted to $322,123 and $28,961 of amortization of debt discount during the period. The Company also issued 4,359,333 Settlement shares to Rockwell to reduce certain outstanding liabilities through September 30, 2016 resulting in a loss on debt extinguishment of $68,814.

 Furthermore, the Company into an advisory services agreement with TCA Global Master Fund for investment banking services. The Company shall issue $250,000 in the form of restricted shares of the Company common stock. The issuance of shares are subject to an anti-dilution share issuances to the extent the cash proceeds from the share issuances are inadequate to satisfy the $250,000 fee. The Company issued 139,750 shares of common stock at closing valued at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the agreement date. As of September 30, 2016, an additional issuance of 8,193,613 shares with a fair market value of $245,808 are required to satisfied the advisory agreement whereby an additional financing costs has been recorded to common stock payable.  The Company recorded $37,724 of stock-based financing costs for the three months ended September 30, 2016.

There was no Other Income (expense) during the three months ended September 30, 2015.

Weighted average number of shares

 

The weighted average number of shares outstanding was 11,219,430 and 2,799,999 for the years ended September 30, 2016 and 2015, respectively. The weighted average number of shares is an average calculation incorporating changes to the shares outstanding within the period reported.

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Six month Period Ended September 30, 2016 Compared to Six month Period Ended September 30, 2015.

Net Losses

Our net loss for the six months ended September 30, 2016 was $1,198,089 compared to a net loss of $3,976, during the six months ended September 30, 2015. Our loss was attributable to financing and administrative costs and professional fees incurred compared to nominal business activity in the prior year.

This change in net loss was primarily the result of the following:

Revenue

We recognized $0 of revenue during the six months ended September 30, 2016 compared to $200 of revenue during the six months ended September 30, 2015.  The decrease in revenue was attributable to limited resources to maintain revenue.

Operating expenses

We incurred operating expenses of $157,189 during the six months ended September 30, 2016 compared to $4,176 of operating expenses during the six months ended September 30, 2015. The primary expense in the six months ended September 30, 2016 was $60,000 of salary expense to our Chief Executive Officer in accordance with an employment agreement dated January 26, 2016. Other operating expenses consisted of general and administrative fees of $97,189 in the six months ended September 30, 2016 compared to $4,176 in the six months ended September 30, 2015 related to office, compliance and professional fees.

Other Income (Expense)

We incurred interest expense of $228,471 and financing costs of $93,554 related to our convertible debenture in the six months ended September 30, 2016. Additionally, the change in fair value of the Company’s derivative instruments amounted to $515,210 and $32,856 of amortization of debt discount during the period. The Company also issued 4,359,333 Settlement shares to Rockwell to reduce certain outstanding liabilities through September 30, 2016 resulting in a loss on debt extinguishment of $68,814.

 Furthermore, the Company into an advisory services agreement with TCA Global Master Fund for investment banking services. The Company shall issue $250,000 in the form of restricted shares of the Company common stock. The issuance of shares are subject to an anti-dilution share issuances to the extent the cash proceeds from the share issuances are inadequate to satisfy the $250,000 fee. The Company issued 139,750 shares of common stock at closing valued at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the agreement date. As of September 30, 2016, an additional issuance of 8,193,613 shares with a fair market value of $245,808 are required to satisfied the advisory agreement whereby an additional financing costs has been recorded to common stock payable.  The Company recorded $101,995 of stock-based financing costs for the six months ended September 30, 2016.

There was no Other Income (expense) during the six months ended September 30, 2015.

Weighted average number of shares

 

The weighted average number of shares outstanding was 5,749,623 and 2,799,999 for the years ended September 30, 2016 and 2015, respectively. The weighted average number of shares is an average calculation incorporating changes to the shares outstanding within the period reported.

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LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2016 and March 31, 2016, we had $226 and $17 of cash and cash equivalents, respectively.

 

We have experienced losses of $1,198,089 and $3,976 for the six months ended September 30, 2016 and 2015, respectively, and have an accumulated deficit of $17,022,666 at September 30, 2016. In addition, we have not completed our efforts to establish a stable recurring source of revenues sufficient to cover our operating costs and expect to continue to generate losses for the foreseeable future. There is no assurances that we will be able to obtain an adequate level of financing needed for our near term requirements or the long-term development and exploration of our leases. These conditions raise substantial doubt about our ability to continue as a “going concern”.

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from directors and, or, the private placement of convertible debt and/or issuance of common stock.  

Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management's efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.

Cash Flows from Operating Activities

 

We have generated negative cash flows from operating activities. For the six months ended September 30, 2016, net cash flows used in operating activities was $84,231 consisting primarily of a net loss of $1,198,089, offset by the amortization of financing costs of $65,054, non-cash stock compensation of $101,995 and a change in derivative liability of $515,210 and debt discount feature at issuance of $178,498 and other related financing costs of $60,781, an increase of $38,949 in accounts payables and accrued liabilities, an increase of $40,010 of accrued officer salary and an increase of $44,547 in accrued interest payable. For the six months ended September 30, 2015, net cash flows used in operating activities was $2,976 consisting of a net loss of $3,976 and an increase in accounts payable of $1,000.

Cash Flows from Investing Activities

 

We neither used nor generated cash from investing activities.  

 

Cash Flows from Financing Activities

 

We have financed our operations primarily from the issuance of convertible debt in the six months ended September 30, 2016. We generated cash from financing activities of $77,500 in the issuance of convertible debentures, offset by $6,500 of financing costs, and $13,440 from shareholder loans in the six months ended September 30, 2016. The financing activities in the six months ended September 30, 2015 consisted of a bank overdraft of $87.  

PLAN OF OPERATION AND FUNDING

We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business

Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to the acquisition of assets. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

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MATERIAL COMMITMENTS

As of the date of this Annual Report, we do not have any material commitments.

GOING CONCERN

The independent auditors' audit report accompanying our March 31, 2016 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

OFF-BALANCE SHEET ARANGEMENTS

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

SIGNIFCANT ACCOUNTING POLICIES

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.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximate their fair values based on the short-term maturity of these instruments. The carrying amount of the Company’s promissory note obligations approximate fair value, as the terms of these notes are consistent with terms available in the market for instruments with similar risk.

 

We account for our derivative financial instruments, consisting solely of certain stock purchase warrants that contain non-standard anti-dilutions provisions and/or cash settlement features, and certain conversion options embedded in our convertible instruments, at fair value using level 3 inputs. We determine the fair value of these derivative liabilities using the Black-Scholes option pricing model when appropriate, and in certain circumstances using binomial lattice models or other accepted valuation practices.

 

When determining the fair value of our financial assets and liabilities using the Black-Scholes option pricing model, we are required to use various estimates and unobservable inputs, including, among other things, contractual terms of the instruments, expected volatility of our stock price, expected dividends, and the risk-free interest rate. Changes in any of the assumptions related to the unobservable inputs identified above may change the fair value of the instrument. Increases in expected term, anticipated volatility and expected dividends generally result in increases in fair value, while decreases in the unobservable inputs generally result in decreases in fair value.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

No report required.

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ITEM 4. CONTROLS AND PROCEDURES

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’ s  rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required  disclosure.

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2016. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the three month period ended September 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OFPROCEEDS

No report required.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

No report required.

ITEM 5. OTHER INFORMATION

No report required.

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ITEM 6. EXHIBITS

Exhibits:

3.1*

Articles of Incorporation, as amended, of Elite Group, Inc. filed on July 22, 2016

3.2*

Bylaws of Elite Group, Inc.

31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or   15d-14(a).

31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or   15d-14(a).

32.1 Certifications pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of  2002.

101.INS**

XBRL Instance Document

101

PRE**

XBRL Taxonomy Extension Presentation Linkbase

101.LAB**XBRL Taxonomy Extension Label Linkbase

101.DEF**XBRL Taxonomy Extension Definition Linkbase

101.CAL**XBRL Taxonomy Extension Calculation Linkbase

101.SCH**XBRL Taxonomy Extension Schema

* Incorporated by reference from our Form 8-K filed July 26, 2016

* Incorporated by reference from our Form S-1 registration statement filed July 11, 2014

**Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed "furnished" and not "filed" or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, or deemed "furnished" and not "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, on January 18, 2017.

ELITE BOOKS INC.

By: /s/ Terrence Tecco

        Terrance Tecco

Title: Director (Principal Executive, Financial and Accounting Officer)

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