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EX-32.1 - CERTIFICATION - WOD Retail Solutions, Inc.deac_ex321.htm
EX-31.2 - CERTIFICATION - WOD Retail Solutions, Inc.deac_ex312.htm
EX-31.1 - CERTIFICATION - WOD Retail Solutions, Inc.deac_ex311.htm
EX-21.1 - LIST OF SUBSIDIARIES - WOD Retail Solutions, Inc.deac_ex211.htm

 

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 period ended September 30, 2016

 

Commission File Number: 50-11050

 

 

ELITE DATA SERVICES, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Florida

 

59-2181303

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

720 S. Colorado Blvd., PH North

Denver, CO 80246

(Address of principal executive offices)

 

(702) 240-9378

(Issuer’s telephone number)

 

1550 Wewatta St.

Denver, CO 80202

(Former name or former address, if changed since last report)

 

Registrant’s telephone number including area code: (702) 240-9378

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 o

 

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 x No o

 

Larger accelerated filer

o

Accelerated filer

o

Non-accelerated filer

o

Smaller reporting company

x

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of October 26, 2017, the Company had 150,018,799 shares of common stock of the registrant outstanding.

 

 
 
 
 

ELITE DATA SERVICES, INC.

Quarterly Report on Form 10-Q for the period ended September 30, 2016

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

Item 1.

Unaudited Condensed Consolidated Financial Statements.

4

Condensed Consolidated Balance Sheets

4

Condensed Consolidated Statement of Operations

5

Condensed Consolidated Statement of Cash Flows

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

42

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

47

Item 4.

Controls and Procedures.

47

 

PART II – OTHER INFORMATION

 

Item 1.

Legal Proceedings.

49

Item 1A.

Risk Factors.

49

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

50

Item 3.

Defaults Upon Senior Securities.

50

Item 4.

Submission of Matters to a Vote of Security Holders.

50

Item 5.

Other Information.

50

Item 6.

Exhibits.

51

Signatures

55

 

 
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Table of Contents

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Information included or incorporated by reference in this Report contains forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, 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. Among the material risks which may impact Forward Looking Statements are the following: the risk that we are unsuccessful in obtaining additional capital through the private sale of common shares, debt and/or convertible debt on commercially reasonable terms and which we require in order to fund the Company’s business; the risk that we are unsuccessful in growing and developing our business, and the risk that our business does not perform to expectations, or does not operate profitably. The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, apply to forward-looking statements made by the Company. The reader is cautioned that no statements contained in this Report should be construed as a guarantee or assurance of future performance or results. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks described in this report and matters described in this report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. These forward-looking statements are based on current expectations, and the Company assumes no obligation to update this information. Readers are urged to carefully review and consider the various disclosures made by the Company in this Report and in the Company’s other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of certain of the risks and factors that may affect the Company’s business.

 

 
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Table of Contents

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

  ELITE DATA SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

   

 

 

September 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

(Unaudited)

 

 

 

 

ASSETS 

 

 

 

 

 

 

CURRENT ASSETS: 

 

 

 

 

 

 

Cash 

 

$ 953

 

 

$ 1,730

 

Total Current Assets 

 

 

953

 

 

 

1,730

 

 

 

 

 

 

 

 

 

 

OTHER ASSET: 

 

 

 

 

 

 

 

 

WOD membership

 

 

20,000

 

 

 

-

 

Deposit

 

 

100,000

 

 

 

100,000

 

Total Assets 

 

$ 120,953

 

 

$ 101,730

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities 

 

$ 728,718

 

 

$ 251,527

 

Convertible notes from related party

 

 

350,000

 

 

 

136,960

 

Derivative instrument liability 

 

 

1,437,544

 

 

 

1,043,217

 

Convertible note payable, net of discount $0 and $50,000, respectively

 

 

50,000

 

 

 

-

 

Convertible notes payable, net of discount of $0 and $194,659, respectively 

 

 

2,962,922

 

 

 

180,437

 

Total Current Liabilities 

 

 

5,529,184

 

 

 

1,612,141

 

 

 

 

 

 

 

 

 

 

LONG TERM DEBT: 

 

 

 

 

 

 

 

 

Convertible note payable, net of discount $0 and $175,445, respectively

 

 

3,000,000

 

 

 

49,555

 

 

 

 

 

 

 

 

 

 

Convertible note payable, related party 

 

 

299,500

 

 

 

587,564

 

 

 

 

 

 

 

 

 

 

Total Liabilities 

 

 

8,828,684

 

 

 

2,249,260

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIT: 

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 250,000,000 shares Series B authorized; issued and outstanding 2,100,000 and 0, respectively

 

 

210

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 500,000,000 shares authorized; issued and outstanding 136,518,799 and 27,722,266, respectively 

 

 

13,651

 

 

 

2,771

 

Subscription stock not issued

 

 

75,000

 

 

 

75,000

 

Additional paid-in capital 

 

 

22,905,541

 

 

 

11,820,411

 

 

 

 

 

 

 

 

 

 

Deficit accumulated 

 

 

(31,702,133 )

 

 

(14,045,712 )

Total Stockholders’ Deficit 

 

 

(8,707,731 )

 

 

(2,147,530 )

Total Liabilities and Stockholders’ Deficit 

 

$ 120,953

 

 

$ 101,730

 

 

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

 

 
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Table of Contents

 

ELITE DATA SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ 1,596

 

OPERATING EXPENSES 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting services 

 

 

70,000

 

 

 

79,000

 

 

 

90,000

 

 

 

138,794

 

Asset impairment

 

 

480,000

 

 

 

-

 

 

 

5,380,000

 

 

 

-

 

Management services

 

 

10,000,000

 

 

 

-

 

 

 

10,000,000

 

 

 

-

 

Investor relations services 

 

 

-

 

 

 

31,822

 

 

 

3,115

 

 

 

323,260

 

Warrants issued for services 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

481,156

 

General and administrative

 

 

3,759

 

 

 

122,029

 

 

 

36,366

 

 

 

202,454

 

Total Operating Expenses 

 

 

10,073,759

 

 

 

232,851

 

 

 

15,509,481

 

 

 

1,145,664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS 

 

 

(10,553,759 )

 

 

(232,851 )

 

 

(15,509,481 )

 

 

(1,114,068 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE): 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain forgiveness of debt

 

 

25,000

 

 

 

571

 

 

 

59,177

 

 

 

-

 

Amortization debt discount

 

 

(555,574 )

 

 

(22,917 )

 

 

(846,882 )

 

 

(22,917 )

Non-cash settlement of debt

 

 

-

 

 

 

(85,842

)

 

 

-

 

 

 

(85,842

)

Initial derivative expense

 

 

(259,422 )

 

 

-

 

 

 

(259,422 )

 

 

-

 

(Loss) gain on derivative revaluation

 

 

(284,282 )

 

 

138,097

 

 

 

(1,409,275 )

 

 

138,097

 

(Loss) on derivative settlement

 

 

(3,015 )

 

 

-

 

 

 

(271,033 )

 

 

-

 

(Loss) gain on extinguishment of debt

 

 

-

 

 

 

-

 

 

1,262,162

 

 

 

(958,700 )

Interest expense – related party

 

 

(20,000 )

 

 

(38,150 )

 

 

(87,165 )

 

 

(61,329 )

Interest expense - other

 

 

(150,460 )

 

 

(274,739 )

 

 

(472,745 )

 

 

(307,027 )

Total Other Expense

 

 

(1,247,753 )

 

 

(282,980 )

 

 

(2,025,183 )

 

 

(1,297,718 )

LOSS BEFORE PROVISION FOR INCOME TAXES 

 

 

(11,801,512 )

 

 

(515,831 )

 

 

(17,534,664 )

 

 

(2,441,786 )

PROVISION FOR INCOME TAX 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS 

 

$ (11,801,512 )

 

$ (515,831 )

 

$ (17,534,664 )

 

$ (2,441,786 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Per Share Data: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Per Share - basic and diluted 

 

$ (0.09 )

 

$ (0.02 )

 

$ (0.16 )

 

$ (0.11 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted 

 

 

132,285,614

 

 

 

25,581,065

 

 

 

109,276,487

 

 

 

22,886,381

 

 

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

 

 
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Table of Contents

 

ELITE DATA SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

OPERATING ACTIVITIES: 

 

 

 

 

 

 

Net loss

 

$ (17,534,664 )

 

$ (2,441,786 )

 

 

 

 

 

 

 

 

 

Preferred stock issued for services

 

 

10,000,000

 

 

 

-

 

Stock issued for accrued interest

 

 

281

 

 

 

-

 

Forgiven interest and accounts payable to notes payable

 

 

119,964

 

 

 

259,029

 

 

 

 

 

 

 

 

 

 

Asset impairment

 

 

5,380,000

 

 

 

-

 

Debt settlement

 

 

-

 

 

 

85,842

 

Loss (gain) derivative settlement

 

 

271,033

 

 

 

-

Loss (gain) on extinguishment of debt

 

 

(1,262,162 )

 

 

958,700

 

Stock compensation for investor relations services and consulting

 

 

-

 

 

 

473,053

 

Warrants issued for services

 

 

-

 

 

 

481,156

 

(Gain) loss on derivative instruments

 

 

1,409,275

 

 

 

(138,097

)

Initial derivative expense

 

 

259,422

 

 

 

-

 

Amortization debt discount

 

 

846,882

 

 

 

22,917

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

-

 

 

 

(1,875 )

Accounts payable and accrued expenses

 

 

477,191

 

 

 

48,792

 

Net cash (used in) operating activities

 

 

(32,777 )

 

 

(252,269 )

INVESTING ACTIVITY: 

 

 

 

 

 

 

 

 

Deposit

 

 

-

 

 

 

(100,000 )

Net cash used in investing activity

 

 

-

 

 

 

(100,000 )

FINANCING ACTIVITIES: 

 

 

 

 

 

 

 

 

Proceeds from stock sale

 

 

-

 

 

 

25,000

 

Proceeds from convertible promissory notes, net

 

 

32,000

 

 

 

346,500

 

Payments to related party

 

 

-

 

 

 

(48,810 )

Proceeds from related parties

 

 

-

 

 

 

35,867

 

Net cash received from financing activities

 

 

32,000

 

 

 

358,557

 

NET INCREASE (DECREASE) IN CASH 

 

 

(777 )

 

 

6,288

 

CASH BEGINNING OF PERIOD 

 

$ 1,730

 

 

 

659

 

CASH END OF PERIOD 

 

$ 953

 

 

 

6,947

 

SUPPLEMENTAL DISCLOSURES: 

 

 

 

 

 

 

 

 

Income taxes paid

 

$

 

 

 

 

Interest paid

 

$

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Issuance of common stock for conversion of debt

 

$ 61,161

 

 

 

1,754,344

 

 

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

 

 
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2016

(Unaudited)

 

NOTE 1. DESCRIPTION OF BUSINESS

 

Elite Data Services, Inc., a Florida corporation (hereinafter the “Company”, “Our”, “We” or “Us”) is a retail focused management company which currently owns a 20% minority interest of WOD Market LLC, a Colorado limited liability company, a provider of intelligent retail solutions for gym owners and coaches, including the management of retail sales, up front inventory purchases, ongoing inventory management, payments, marketing, and related services. Under a joint venture agreement dated March 14, 2017, the Company today co-manages WOD with WOD Holdings Inc. (“WODH”), a Delaware corporation majority owned by Brenton Mix, our Chief Executive Officer, and Taryn Watson, a related party.

 

Prior to March 14, 2017, the Company was a technology driven management company which owned and operated online marketing and gaming businesses: Elite Data Marketing LLC, and Elite Gaming Ventures LLC, from 2013 and 2014, respectively.

 

During the year ending December 31, 2015, we made limited progress with our online marketing platforms due to lack of funding to complete required programming and coding enhancements. During the year ending December 31, 2016, we anticipated obtaining additional funding which would have afforded us the ability of bringing certain new marketing offerings to our platforms in hopes of increasing traffic flow, capturing new users and generating revenues. Due to the Company not being a current and fully reporting company in 2016, the Company was unable to raise the capital needed to advance the online marketing business resulting in a loss of business opportunities.

 

On March 14, 2017, Company executed a note cancellation agreement and assignment with Baker & Myers & Associates LLC which resulted in Elite Data Marketing LLC no longer being a subsidiary of the Company, with no further operational effect or obligation to the Company.

 

Separately, pursuant to the terms of the Joint Venture with HYHI formed on or about May 18, 2016, we intended to implement the creation of the joint venture relationship using Elite Data Holdings S.A., a Honduras corporation, a wholly-owned subsidiary of Elite Gaming Ventures LLC, a Florida limited liability company (“EVG”), a wholly-owned subsidiary of the Company, and a distributor license from HYHI and El Mar Muerto Beauty Mineral, S.A., a Honduras corporation (“EMBM”) to establish gaming operations (the “Purpose”) by distributing and maintaining a total of eighty (80) slot machines in the cities of La Lima, Cortes; eighty (80) slot machines in the cities of TrujColon; and One Hundred and Sixty (160) slot machines in Roatan in the bay island of Honduras.

 

In order to effect the distributor license related to the gaming operations, the Company and EVG was responsible for providing any and all financial and operational resources required to execute on the license granted to the Company, including, but not limited to, the funding for the initial and ongoing operating costs in the minimum amount of Five Hundred Thousand Dollars (USD $500,000) on or before December 31, 2016 (the “Initial Funding”). See Note 16.

 

During the period ending December 31, 2016, the Company was unable to raise the capital required to pay the minimum operational costs of the joint venture which resulted in a loss of business opportunities, and further strained the relationship with HYHI, our joint venture partner.

 

On March 14, 2017, Company executed a joint venture termination agreement with H Y H Investments S.A. which resulted in Elite Gaming Ventures LLC (and, its wholly-owned subsidiary, Elite Data Holdings S.A.) no longer being a subsidiary of the Company, with no further operational effect or obligation to the Company, except for certain amounts owed by the Company under a further amendment to the Amended and Restated Redeemable Note executed on May 18, 2016 at the time the Joint Venture was formed.

 

 
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Separately, the Company intended to expand its operations in the fourth quarter of 2016 to include intelligent retail solutions for gym owners and coaches through the completion of the acquisition of WOD, as set forth in the definitive agreement dated August 26, 2016, at which time the Company acquired a minority interest stake of 20% of WOD, with 100% ownership interest of WOD anticipated to be completed on or before October 15, 2016. See Note 15.

 

WOD serves the fitness community by allowing coaches and trainers to focus on what’s important while athletes have access to the products they need to perform at their highest level. WOD aims to relieve gym owners and coaches of the burden of managing retail sales including upfront inventory purchases, ongoing inventory management, payments, marketing, etc. while also providing a service for members to have convenient access to products that help them perform better. WOD intends to forge a mutually beneficial relationship with each gym, customer and vendor to ensure the best possible experience.

 

On January 10, 2017, the Company executed the first amendment to the purchase of WOD to extend the second closing date from on or about September 15, 2016 to on or about March 31, 2017, and further extend the third and final closing date from on or about October 15, 2016 to on or about June 30, 2017, respectively.

 

Pursuant to management’s decision to divest itself from its online marketing and gaming businesses, and focus exclusively on the fitness retail sales business, the Company executed the second amendment to the definitive agreement on March 14, 2017, which further amended certain terms of the WOD purchase, including the formation of a joint venture to further develop and manage the current WOD business.

Under the terms of the Joint Venture, the initial ownership interest of WOD was 20% owned by the Company, with the remaining 80% owned WODH, with the option of Company to provide additional capital contributions to WOD in increments of not less than $10,000 up to a total of $8 million dollars in the aggregate, which included an equity exchange of up to a total of 800 units (80%) of WOD owned initially by WODH to the Company for a total of approximately 199,000 shares of Series B Preferred Stock and approximately 19,801,000 shares of Common Stock of the Company (the “Shares”) to be issued to WODH upon the completion of a final closing on or before December 31, 2018, under the terms set forth in Amendment No. 2.

Until a minimum of at least $4 million in additional capital contributions have been made by the Company to WOD, resulting in a controlling ownership interest of not less than 60% of WOD by the Company, all the Shares of Company stock earmarked for the equity exchange with WODH is being held in a Voting Trust (as defined elsewhere in this filing), along with other key shareholder positions, in order to recapitalize the Company post a 1:1000 reverse split (which was previously approved), pending effectiveness after the Company becomes a current and fully-reporting public company. Our ability to complete subsequent phases of our newly development business plan and operations are subject to us obtaining additional financing as these expenditures will exceed our cash reserves.

 

For more information, see Note 15.

 

NOTE 2. BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements of Elite Data Services, Inc. (the “Company”) are presented in accordance with the requirements for Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles. In the opinion of management, all adjustments (all of which were of a normal recurring nature) considered necessary to fairly present the financial position, results of operations, and cash flows of the Company on a consistent basis, have been made. The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our annual 10-K filing, filed with the SEC on September 27, 2016.

 

 
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In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2015 have been omitted. 

 

Going Concern 

 

The Company has accumulated a deficit of $31,702,133. The Company currently has only limited working capital with which to continue its operating activities. The amount of capital required to sustain operations is subject to future events and uncertainties. The Company must secure additional working capital through loans, sale of equity securities, or a combination, in order to implement its current business plans. There can be no assurance that such funding will be available in the future, or available on commercially reasonable terms favorable to the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. 

 

The accompanying financial statements have been presented on the basis of the continuation of the Company as a going concern and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. 

 

Management continued to manage its costs for the nine months ended September 30, 2016 to ensure appropriate funding is on hand for its continued operations through convertible debentures and financing from a related party. See Note 7 and 8. Management’s plans include the raising of capital through the equity markets to fund future operations and pay debts and generating of revenue through our business. See Note 12. However, even if we do raise sufficient capital to support our operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable us to develop business to a level where we will generate profits and positive cash flows from operations.

 

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

 

Principles of Consolidation 

 

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and include the accounts of the Company and its subsidiaries, Dynamic Energy Development Corporation and Transformation Consulting, Inc. All intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to intangible assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. 

 

 
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Impairment of Long-Lived Intangible Assets

 

We review our long-lived assets, including intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment, if any, is measured as the excess of the carrying amount over the fair value based on market value (when available) or discounted expected cash flows of those assets, and is recorded in the period in which the determination is made. Intangible assets not subject to amortization are tested annually for impairment and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

 

Development Costs 

 

Development costs are expensed in the period they are incurred unless they meet specific criteria related to technical, market and financial feasibility, as determined by management, including but not limited to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project. If all criteria are met, the costs are deferred and amortized over the expected useful life, or written off if a product is abandoned. For the nine months ended September 30, 2016, the Company incurred no development costs. As of September 30, 2016, the Company had no deferred product development costs. 

 

Income Taxes

 

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted the accounting standards codified in ASC 740, Income Taxes as of its inception. Pursuant to those standards, the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not that it will utilize the net operating losses carried forward in future years. 

 

ASC 740-10-25 prescribes recognition thresholds that must be met before a tax position is recognized in the financial statements and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. An entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. Based on its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. 

 

The Company does not have any unrecognized tax benefits as of September 30, 2016 that, if recognized, would affect the Company’s effective income tax rate. The Company’s policy is to recognize interest and penalties related to income tax issues as components of income tax expense. The Company did not recognize or have any accrual for interest and penalties relating to income taxes as of September 30, 2016 and December 31, 2015.

 

Cash

 

Cash include all highly liquid instruments with an original maturity of three months or less at the date of purchase. The Company maintains its cash in cash deposit accounts, which are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per legal ownership. At times, the Company’s accounts may exceed federally insured limits. To date, the Company has not experienced any losses in such accounts. At September 30, 2016, the Company had $953 cash and no other cash equivalents. 

 

Fair Value of Financial Instruments 

 

The Company’s financial instruments consist of cash, accounts payable, accrued liabilities, line of credit payable, loans from a related party, contingent consideration payable, and convertible note 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. 

 

 
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Fair Value Measurement 

 

The Company values its derivative instruments under FASB ASC 820 which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. 

 

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 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 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 Company’s financial instruments consisted of cash, prepaid expense, deposit, accounts payable and accrued liabilities, line of credit, loan from stockholders and convertible debt. The estimated fair value of cash, prepaid expense, deposit, accounts payable and accrued liabilities, line of credit, loan from stockholders approximates its carrying amount due to the short maturity of these instruments. The recognition of the derivative values of convertible debt are based on the weighted-average Black-Scholes option pricing model. 

 

Revenue Recognition

 

The Company recognizes revenue in accordance with the FASB ASC Section 605-10-S99, Revenue Recognition, Overall, SEC Materials (“Section 605-10-S99”). Section 605-10-S99 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured.

 

Net Income (Loss) Per Common Share 

 

Basic loss per common share (“EPS”) is calculated by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The number of common shares that are exercisable or converted into common stock is not material to affect diluted EPS results. Further, since the Company shows losses for the periods presented basic and diluted loss per share are the same for all periods presented.

 

 
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Common Share Non-Monetary Consideration

 

In situations where common shares are issued and the fair value of the goods or services received is not readily determinable, the fair value of the common shares is used to measure and record the transaction. The fair value of the common shares issued in exchange for the receipt of goods and services is based on the stock price as of the earliest of the date at which:

 

i

The counterparty’s performance is complete;

ii.

commitment for performance by the counterparty to earn the common shares is reached; or

iii.

the common shares are issued if they are fully vested and non-forfeitable at that date.

 

Stock-Based Compensation

 

On December 1, 2005, the Company adopted the fair value recognition provisions codified in ASC 718, Compensation-Stock Compensation. The Company adopted those provisions using the modified-prospective-transition method. Under this method, compensation cost recognized for all periods prior to December 1, 2005 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of November 30, 2005, based on the grant-date fair value and b) compensation cost for all share-based payments granted subsequent to November 30, 2005, based on the grant-date fair value. In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital. The results for periods prior to December 1, 2005 were not restated.

 

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from parties other than employees in accordance with ASC 505, Equity. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the counterparty.

 

Share Purchase Warrants

 

The Company accounts for common share purchase warrants at fair value in accordance with ASC 815, “Derivatives and Hedging.” The Black-Scholes option pricing valuation method is used to determine fair value of these warrants. Use of this method requires that the Company make assumptions regarding stock volatility, dividend yields, expected term of the warrants and risk-free interest rates. 

 

Recently Issued Accounting Pronouncements

 

Other than as set forth below, management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

 

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10).” The amendments require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). The amendments also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not expect to early adopt this guidance and does not believe that the adoption of this guidance will have a material impact on its consolidated financial statements.

 

 
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In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 amends several aspects of the accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted any interim or annual period. If early adopted, an entity must adopt all of the amendments in the same period. The Company is currently evaluating the potential impact of the adoption of ASU 2016-09 on the Company’s consolidated financial statements.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC during the current reporting period did not, or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

Effects of Notes Payable Amendments. Cancellation and Forgiveness of Debt

 

In May 2016 the Company reorganized much of its debt and previous venture agreements. The table below shows the impact on the condensed consolidated financial statement of the modifications in these agreements. This table only shows those notes that were modified.

 

Holder

 

Note

Value

Reorg

 

 

Value

Change

Reorg

 

 

Forgiveness

Cancellation

 

 

Note

Balance

September 30, 2016

 

 

Interest

Balance

Reorg

 

 

Forgiven

Interest

 

 

Retroactive

Interest

 

Note 1

 

$ 112,500

 

 

$ 187,500

 

 

$ 112,500

 

 

$ 300,000

 

 

$ 3,519

 

 

 

 

 

$ 19,600

 

Note 2

 

 

225,000

 

 

 

175,000

 

 

 

225,000

 

 

 

400,000

 

 

 

4,375

 

 

 

 

 

 

26,133

 

Note 3

 

 

 

 

 

 

4,900,000

 

 

 

 

 

 

 

4,900,000

 

 

 

 

 

 

 

 

 

 

 

 

Note 4

 

 

587,564

 

 

 

 

 

 

 

587,564

 

 

 

500,000

 

 

 

110,353

 

 

$ 92,465

 

 

 

33,417

 

Note 5

 

 

136,960

 

 

 

38,040

 

 

 

136,960

 

 

 

175,000

 

 

 

41,564

 

 

 

 

 

 

 

 

 

Note 6

 

 

 

 

 

 

27,500

 

 

 

 

 

 

 

27,500

 

 

 

 

 

 

 

 

 

 

 

1,054

 

Note 7

 

 

50,000

 

 

 

 

 

 

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative

Liability

Reorg

 

 

Debt

Discount

Reorg

 

 

Note

Extinguishment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 1

 

$ 913,039

 

 

$ 66,421

 

 

$ 112,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 2

 

 

911,332

 

 

 

83,288

 

 

 

225,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 4

 

 

 

 

 

 

 

 

 

 

587,564

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 5

 

 

 

 

 

 

 

 

 

 

136,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 7

 

 

 

 

 

 

50,000

 

 

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
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The table below shows the notes payable categorized by their remaining term at the nine months ending September 30, 2016.

 

Holder

 

Short
Term

 

 

Long
Term

 

 

Related Party

 

Note 1

 

$ 300,000

 

 

 

 

 

 

 

Note 2

 

$ 400,000

 

 

 

 

 

 

 

Note 3

 

$ 1,900,000

 

 

$ 3,000,000

 

 

 

 

Subtotal

 

 

 

 

 

 

3,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 4

 

 

250,000

 

 

 

250,000

 

 

Yes

 

Note 5

 

 

100,000

 

 

 

49,500

 

 

Yes

 

Subtotal

 

 

350,000

 

 

 

299,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 6

 

 

27,500

 

 

 

 

 

 

 

 

Note 7

 

 

50,000

 

 

 

 

 

 

Own display not in total short term

 

Note 8

 

 

17,500

 

 

 

 

 

 

 

 

Note 9

 

 

79,310

 

 

 

 

 

 

 

 

Note 10

 

 

42,239

 

 

 

 

 

 

 

 

Note 11

 

 

14,787

 

 

 

 

 

 

 

 

Note 12

 

 

141,586

 

 

 

 

 

 

 

 

Note 13

 

 

40,000

 

 

 

 

 

 

 

 

Total

 

 

2,962,922

 

 

 

 

 

 

 

 

 

NOTE 4. DEPOSIT FOR PURCHASE OF LICENSE (JOINT VENTURE PAYMENT)

 

Gaming License and Securities Purchase Agreement

 

On April 4, 2015, the Company instructed the escrow agent to deliver $100,000 as a deposit in good faith pursuant to the Securities Purchase Agreement dated April 4, 2015 (the “SPA”) and Promissory Note dated April 6, 2015 (the “Note”) to acquire all of the capital stock of El Mar Muerto Beauty Mineral, Sociedad Anonima (hereafter “EMBM”) a Honduras corporation, whose sole assets consist of a Honduras gaming license for EMBM’s use, which permits the operation of Eighty (80) gaming machines in Trujillo, Eighty (80) gaming machines in La Lima, and One Hundred and Sixty (160) gaming machines in Roatan, the largest of Honduras’s bay islands, for a total purchase price of $10,000,000. On September 30, 2015, the Company amended the Note and SPA to reflect a due date of April 6, 2016 in conjunction with the first payment of Nine Hundred Thousand Dollars ($900,000), which is due in either cash, stock, or 25% of the net revenues of EMBM’s operations at the seller’s option, and the current purchase price owed was reduced to $9,900,000, which deducts the $100,000 deposit tendered on April 4, 2015 as referenced herein. The business purpose for the amendment was to allow the Company the proper time to incorporate a Honduras corporation in compliance with the laws of the Republic of Honduras to own the securities of EMBM and effectively be able to transact business in that municipality. The good-faith non-refundable deposit permitted negotiation for a commitment at a later date, which the Company will recognize upon the effective date of April 6, 2016.

 

First Amendment; Securities Purchase Agreement and Note

 

On September 30, 2015, the Company amended the Note and SPA to reflect a due date of April 6, 2016 in conjunction with the first payment of Nine Hundred Thousand Dollars ($900,000), which is due in either cash, stock, or 25% of the net revenues of EMBM’s operations. The Note was also amended to reflect the current purchase price owed was reduced to $9,900,000, which deducts the $100,000 non-refundable deposit tendered on April 6, 2015. The business purpose for this amendment was to allow the Company the proper time to incorporate a Honduras corporation to be in compliance with the laws of the Republic of Honduras to effectively be able to transact business in that municipality. The good-faith non-refundable deposit permitted negotiation for a commitment at a later date.

 

 
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Second Amendment; Securities Purchase Agreement

 

Effective November 20, 2015, the Company signed a Second Amendment (the “Amendment”) to the Securities Purchase Agreement (the “Agreement”) with H y H Investments, S.A. (the “Seller”) regarding the acquisition of the gaming license whereby the Company re-assigned the Agreement to Elite Holdings S.A., a wholly owned subsidiary owned by the Company on a jointly and severally liable basis with the Company so as to comply with the regulatory authority of the Republic of Honduras. The Amendment also removed any Required Approvals on part of the Seller to enter into the Agreement. The Amendment specifies that as long as the Company is current in its payment obligations, upon good faith payment, Purchaser shall have the right to operate gaming machines permitted under the license and proceed with the use of the license as owner of EMBM with full power and authority to contract, license, sub-license, loan, lease, enter into contract or any other business venture in which entitles Purchaser to the benefit of the license on behalf of the Corporation. The Amendment also clarified that the shares of EMBM would be assigned to Elite Holdings, S.A. after the full purchase price had been tendered to the Seller. The Company will recognize the appropriate asset and liability when performance occurs on the effective date April 6, 2016.

 

Third Amendment; Securities Purchase Agreement and Joint Venture Agreement

 

On May 20, 2016, the Company and H Y H Investments, S.A. (“HYHI”) executed the Third Amendment to the Securities Purchase Agreement (the “Third Amendment”), pursuant to which the parties agreed to further clarify and amend and restate certain provisions of the Original Purchase Agreement, First Amendment and Second Amendment (the “Original Purchase Agreement”). Pursuant to the terms of the Third Amendment, the parties mutually agreed to cancel the Original Purchase Agreement dated April 6, 2015, in exchange for a new Joint Venture Agreement (the “Joint Venture”) executed on even date therewith, pursuant to which the Company and HYHI agreed to create a joint venture relationship using Elite Data Holdings S.A., a Honduras corporation, a wholly-owned subsidiary of Elite Gaming Ventures LLC, a Florida limited liability company (“EVG”), a wholly-owned subsidiary of the Company, and a distributor license from HYHI and El Mar Muerto Beauty Mineral, S.A., a Honduras corporation (“EMBM”) to establish gaming operations (the “Purpose”) by distributing and maintaining a total of eighty (80) slot machines in the cities of La Lima, Cortes; eighty (80) slot machines in the cities of Trujillo, Colon; and One Hundred and Sixty (160) slot machines in Roatan in the bay island of Honduras. In addition, the Company and EVG agreed to pay HYHI consideration in the total amount of USD $10,000,000 (the “Total Consideration”), including, but not limited to a convertible note, a revenue share plan, and an initial amount of $100,000, which was paid in the Original Purchase Agreement, as amended, and is the same $100,000 deposit described in this Note 4.

 

NOTE 5. RELATED PARTY TRANSACTIONS

 

Baker Myers - Asset Purchase and Convertible Note - ClassifiedRide

 

On January 13, 2014, the Company entered into an asset purchase agreement with Baker Myers and Associates, LLC (“Baker Myers”) to acquire certain assets including, www.classifiedride.com, an online classified listing website where private sellers can buy, sell, and trade their vehicle. Ms. Myers is the managing member and sole owner of Baker Myers, and also serves as an Officer and Director of the Company. As of December 31, 2014, pursuant to GAAP ASC 805-50-30, the transaction carrying value of the assets rather than the fair value were recorded to the transaction as it was being made by a related party. A convertible note totaling $587,564 was amended to reflect the carrying value that carries an interest rate of 8% per annum. The Maturity Date of the Note is January 13, 2017. Upon default of the Note, the interest rate increases to 10%. Pursuant to the Note, Baker Myers may convert all or any part of the outstanding and unpaid principal amount of this Note within 180 days from the date of the note into fully paid and non-assessable shares of Common Stock at the conversion price of $.05 per share with a limitation of 4.99% of the total shares of common stock of the Company outstanding. The Note also contains a $2,000 per day fee for failure to deliver common stock to the Holder upon three days delivery. At September 30, 2016, the note balance and accrued interest was $569,777.

 

 
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Baker Myers - Asset Purchase and Stock Consideration - Autoglance

 

On January 15, 2014, the Company entered into an Agreement with Baker Myers for 51% of the membership interest of Autoglance, LLC, a Tennessee Limited Liability Company, and with it majority control over all owned assets of Autoglance, LLC, including the website www.autoglance.com (collectively “Autoglance”) for 765,000 shares the Company’s common stock as consideration.

 

Baker Myers Note and Share Cancellation and Exchange Agreement

 

On May 18, 2016, the Elite Data Services, Inc. (the “Company”) Company and Baker Myers and Associates LLC, a Nevada limited liability company (“Baker Myers,” an entity owned by Sarah Myers, the President, Chief Operating Officer and Director of the Company ) executed a Note and Share Cancellation and Exchange Agreement (the “Share Exchange Agreement”), with respect to that certain unsecured Promissory Note (the “Original Baker Myers Note”) dated on or about January 13, 2013, in the original amount of $587,500 (the “Original Amount”), pursuant to which Baker Myers agreed to forego and waive any and all right in, entitlement to or interest in (A) a total of $87,500 in principal, a total of $92,465 in accrued interest, late charges, reimbursable attorneys’ fees, reimbursable expenses and any other sums due and payable under the Original Baker Myers Note totaling $179,965 (the “Cancelled Amount”) as of the date of execution (the “Effective Date”), any future payments due under the Original Baker Myers Note and all or any other of Baker Myers’s rights under the Cancelled Amount of the Original Baker Myers Note, thereby extinguishing and canceling the Cancelled Amount of the Original Baker Myers Note and terminating any and all of Company’s obligations thereunder, (B) the Shares (hereinafter also referred to as the “Cancelled Shares”) in exchange for the issuance an Option Agreement (the “Option Agreement”), registered in the Baker Myers’s name to purchase up to a certain number of membership interests (the “EDM Membership Interest”) of Elite Data Marketing LLC, a Florida limited liability company (the “EDM”), in an amount totaling one hundred percent (100%) of the ownership interest in EDM (the “Option 1”), (B) the issuance by Company to Baker Myers of a three-year “cashless” common stock purchase warrant (the “Warrant No. BM-1”) for the right to purchase a total of 3,000,000 shares of Series B Preferred Stock of the Company (the “Preferred Warrant Shares”), at a purchase price of $0.001 per share, with certain rights and preferences as set forth in the certificate of designation (the “Certificate of Designation of Series B Preferred), in exchange for the Cancelled Shares, as referenced in the Share Exchange Agreement, and (C) the issuance of an amended and restated convertible redeemable note (the “Redeemable Note”) in the aggregate principal face amount of Five Hundred Thousand Dollars (US$500,000), at ten percent (10%) interest per annum commencing on date of execution (the “Effective Date”), due and payable by the Company in eight (8) separate equal quarterly payments of Sixty-Two Thousand Five Hundred Dollars (USD $62,500), plus accrued interest to date, due on the first day of each quarter beginning on the date of the first quarter following the date of execution of this Original Baker Myers Note, convertible into shares of the Company’s common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, subject to aggregate conversion limitations of 4.99% and other terms and conditions set forth therein 

 

New Company Subsidiary - Elite Data Marketing LLC

 

On May 20, 2016, the Company executed an Assignment of Ownership Interest with its newly formed subsidiary, Elite Data Marketing LLC, pursuant to which the Company assigned and transferred (A) a certain amount of Company’s ownership interest held in www.classifiedride.com, an online classified listing website (the “ClassifiedRide”), equal to an aggregate total of one hundred percent (100%) of the ownership interest of the ClassifiedRide asset (the “ClassifiedRide Asset”), acquired by the Company from Baker Myers, on or about January 13, 2014, and (B) a certain amount of Company’s ownership interest in Autoglance LLC, a Tennessee limited liability company (the “Autoglance”), equal to an aggregate total of fifty-one percent (51%) of the units of membership interest (the “Autoglance Units”), including, but not limited to, the majority control over all owned assets of Autoglance, acquired by the Company from Baker Myers, on or about January 15, 2014.

 

 
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Separation and Settlement Agreement with Steven Frye

 

On June 15, 2015, the Company entered into a Separation and Settlement Agreement Release of Claims (the “Agreement”) with Steven Frye, our former Chief Executive Officer, Chief Financial Officer, and President. According to the Agreement, the Company agreed to pay Mr. Frye $54,794 for services rendered in the form of 391,386 shares of Common Stock of the Company valued at $0.14 per share on the date of the Agreement. The Agreement further stated Mr. Frye would be responsible for all taxes, and Mr. Frye signed a general release of any and all claims, known or unknown, against the Company. On July 1, 2015, Mr. Frye delivered his executed paperwork to the Company.

 

Separation and Settlement Agreement with Steven Frye

 

On June 15, 2015, the Company entered into a Separation and Settlement Agreement Release of Claims (the “Agreement”) with Steven Frye, our former Chief Executive Officer, Chief Financial Officer, and President. According to the Agreement, the Company agreed to pay Mr. Frye $54,794 for services rendered in the form of 391,386 shares of Common Stock of the Company valued at $0.14 per share on the date of the Agreement. The Agreement further stated Mr. Frye would be responsible for all taxes, and Mr. Frye signed a general release of any and all claims, known or unknown, against the Company. On July 1, 2015, Mr. Frye delivered his executed paperwork to the Company.

 

NOTE 6. PAYABLE – RELATED PARTY

 

Myers – Line of Credit (LOC)

 

On or about September 1, 2013, the Company and Sarah Myers, an individual (and, also the President, Chief Operating Officer and Director of the Company) (“Myers”) executed that certain Revolving Line of Credit Agreement (the “LOC Agreement”) for advances up to a total amount of USD$50,000 for the purposes of providing Company with working capital, as needed from time to time, as set forth in the executed Promissory Note (the “Myers Note”) dated on even date therewith, in the original amount of USD $50,000 (collectively referred to as the “Original Myers Agreements”). The Original Myers Agreements were amended a total of five (5) times during the period of 2013 to 2016 to provide additional working capital for the Company, which increased the principal amount to $175,000.

 

Sixth Amendment to Line of Credit

 

On May 18, 2016, the Company and Myers executed the Sixth Amendment to the LOC Agreement (the “Sixth Amendment”), pursuant to which the parties mutually agreed to cancel and otherwise terminate the effectiveness of the Original Myers Agreements dated September 1, 2013, as amended, whereby Myers would no longer extend any funds to the Company, pursuant to the terms of the Original Agreements, in exchange for the issuance of an amended and restated convertible redeemable note (the “Amended and Restated Note”) in the principal amount of $175,000.00, at ten percent (10%) interest per annum commencing on January 1, 2016 (the “Effective Date”), due and payable to Myers by Company in seven (7) separate equal quarterly payments of Twenty-Fifty Thousand Dollars (USD $25,000), plus accrued interest to date, due on the first day of each quarter beginning on the date of the first quarter following the date of execution of this Note (each a “Maturity Date”), convertible into shares of the Company’s common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, subject to aggregate conversion limitations of 4.99% and other terms and conditions set forth therein. The balances at September 30, 2016 were. Note $149,500, all accrued interest $52,647.

 

 
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NOTE 7. PROMISSORY NOTE

 

Tarpon Bay Partners – Line of Credit

 

In conjunction with the Equity Line as discussed in Note 15 below, the Company issued a promissory note to Tarpon Bay Partners for $50,000, due on January 31, 2016, with 10% interest per annum as consideration for transaction costs incurred by Tarpon. The $50,000 of transaction costs will be treated as a note discount under current Generally Accepted Accounting Principles and the discount will be amortized as costs related to equity financing issuances. At September 30, 2016, the note balance and accrued interest was $50,000 and $5,860, respectively.

 

Tarpon Bay Partners – Line of Credit – Termination Agreement and Convertible Note

 

On May 24, 2016, the Company and Tarpon Bay Partners LLC (“Tarpon”) executed a Termination Agreement (the “Termination Agreement”), in which the parties agreed to cancel the original Equity Purchase Agreement (the “Original Purchase Agreement”), dated July 14, 2015 (except for the original Promissory Notes (the “Original Tarpon Note”) which was amended and restated as set forth below), in the original amount of USD $50,000.00, issued by the Company to Tarpon as additional compensation pursuant to Original Purchase Agreement), which gave the Company the right to issue and sell to Tarpon any of the Five Million Dollars ($5,000,000) of the Company’s common stock.

 

In exchange for the Termination Agreement, the Company agreed to (a) amend and restate the terms of the Original Tarpon Note, in the form of the issuance of an amended and restated convertible redeemable note (the “Amended Tarpon Note”), in the principal amount of $50,000.00, at ten percent (10%) interest per annum commencing on July 14, 2015 (the “Effective Date”), to be due and payable to Tarpon by Company in four (4) separate equal quarterly payments of Twelve Thousand Five Hundred Dollars (USD $12,500), plus accrued interest to date, due on the first day of each quarter beginning on July 1, 2016, convertible into shares of the Company’s common stock at a conversion price equal to fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, subject to aggregate conversion limitations of 9.99% and other terms and conditions set forth therein , and (b) execute a new Equity Purchase Agreement (the “New Purchase Agreement”), pursuant to which the Company would have the right to issue and sell to Tarpon a total of Fifteen Million Dollars ($15,000,000) of the Company’s common stock, under the same terms as the Original Purchase Agreement, except for no additional compensation in lieu of the Amended Tarpon Note, to be executed on such mutually agreed upon date in the future after the Company is current on all SEC filings and is relisted on the Over-the-Counter (OTC) OTCBB and OTCQB markets.

 

Convertible Redeemable Note for Unpaid Invoices

 

On May 18, 2016, the Company and JMS Law Group PLLC (“JMS”) executed a settlement letter (the “Settlement Letter”) in which the parties agreed to settle unpaid invoices for services rendered by JMS to the Company in the amount of $20,000, and further agreed to pay JSM a total of $7,500 for continued services to the Company until July 31, 2016.

 

Pursuant to the terms of the Settlement Letter, the Company issued to JMS a six month convertible redeemable note (the “Note”) in the principal amount of USD $ 27,500, at a rate of ten percent (10%) per annum commencing on date of issuance , convertible into shares of the Company’s common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, and other customary and standard terms and conditions set forth therein. The Note balance and accrued interest was $29,570 at September 30, 2016.

 

Termination Agreement to Definitive Agreement for the acquisition of a new subsidiary

 

Company and Properties of Merit Inc. (“POM”) are parties to that certain Definitive Agreement, dated May 20, 2016, incorporated by reference in Form 8K filed with the SEC on May 24, 2016, pursuant to which the Company agreed to acquire one hundred percent (100%)of the ownership interest in POM, in the form of three (3) separate closings with the first closing originally anticipated on or before May 27, 2016, subject to certain performance requirements of both parties prior to each closing.

 

 

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On July 22, 2016, Elite Data Services, Inc. (the “Company”) and Properties of Merit Inc. (“POM”) executed a Termination Agreement, pursuant to which the parties mutually agreed to terminate the Definitive Agreement dated May 20, 2016, incorporated by reference in Form 8K filed with the SEC on May 24, 2016, pursuant to which the Company agreed to acquire one hundred percent (100%)of the ownership interest in POM, in the form of three (3) separate closings, due to, among other reasons, certain events that occurred subsequent to the date of execution of the Definitive Agreement, including, but not limited to, the Company’s inability to (i) become current in its reporting obligations with the Securities and Exchange Commission, and (ii) obtain the financings required to complete the first and subsequent closings to finance the ongoing activities of POM within a reasonable period of time.

 

The Termination Agreement included amongst other provisions, a mutual release of each party related to any future rights and claims against the other, except that the Company is required to repay POM for advances made to Company pursuant to the executed definitive agreement in the total amount of Seventeen Thousand Five Hundred Dollars (USD $17,500.00), on the terms set forth in executed amended convertible redeemable note (the “Amended Note”), which replaces the original note set forth in the Definitive Agreement. The balance of the Note plus accrued interest at September 30, 2016 was $18,410.

 

NOTE 8. RELATED PARTY CONVERTIBLE PROMISSORY NOTE

 

Baker Myers Convertible Note

 

On January 13, 2014, the Company entered into an asset purchase agreement with Baker Myers and Associates, LLC (“Baker Myers”) to acquire certain assets including, www.classifiedride.com, an online classified listing website where private sellers can buy, sell, and trade their vehicle. Ms. Myers is the managing member and sole owner of Baker Myers, and also serves as an Officer and Director of the Company. As of September 30, 2014, a convertible note was amended and issued in the amount of $587,564 with an interest rate of 8% per annum to Baker Myers. The Maturity Date of the Note is January 13, 2017. Upon default of the Note, the interest rate increases from 8% per annum to 10% per annum. Pursuant to the terms of the Note, Baker Myers may convert all or any part of the outstanding and unpaid principal amount of this Note within 180 days from the date of the note into fully paid and non-assessable shares of Common Stock at the conversion price of $.05 per share with a trading limitation of 4.99% of the authorized common stock of the total shares outstanding. The Note also contains a $2,000 per day fee for failure to deliver common stock to the Holder upon three days delivery.

 

Baker Myers Note and Share Cancellation and Exchange Agreement

 

On May 18, 2016, the Elite Data Services, Inc. (the “Company”) Company and Baker Myers and Associates LLC, a Nevada limited liability company (“Baker Myers,” an entity owned by Sarah Myers, the President, Chief Operating Officer and Director of the Company ) executed a Note and Share Cancellation and Exchange Agreement (the “Share Exchange Agreement”), with respect to that certain unsecured Promissory Note (the “Original Baker Myers Note”) dated on or about January 13, 2013, in the original amount of $587,500 (the “Original Amount”), pursuant to which Baker Myers agreed to forego and waive any and all right in, entitlement to or interest in (A) a total of $87,500 in principal, a total of $92,465 in accrued interest, late charges, reimbursable attorneys’ fees, reimbursable expenses and any other sums due and payable under the Original Baker Myers Note totaling $179,965 (the “Cancelled Amount”) as of the date of execution (the “Effective Date”), any future payments due under the Original Baker Myers Note and all or any other of Baker Myers’s rights under the Cancelled Amount of the Original Baker Myers Note, thereby extinguishing and canceling the Cancelled Amount of the Original Baker Myers Note and terminating any and all of Company’s obligations thereunder, (B) the Shares (hereinafter also referred to as the “Cancelled Shares”) in exchange for the issuance an Option Agreement (the “Option Agreement”), registered in the Baker Myers’s name to purchase up to a certain number of membership interests (the “EDM Membership Interest”) of Elite Data Marketing LLC, a Florida limited liability company (the “EDM”), in an amount totaling one hundred percent (100%) of the ownership interest in EDM (the “Option 1”), (B) the issuance by Company to Baker Myers of a three-year “cashless” common stock purchase warrant (the “Warrant No. BM-1”) for the right to purchase a total of 3,000,000 shares of Series B Preferred Stock of the Company (the “Preferred Warrant Shares”), at a purchase price of $0.001 per share, with certain rights and preferences as set forth in the certificate of designation (the “Certificate of Designation of Series B Preferred), in exchange for the Cancelled Shares, as referenced in the Share Exchange Agreement, and (C) the issuance of an amended and restated convertible redeemable note (the “Redeemable Note”) in the aggregate principal face amount of Five Hundred Thousand Dollars (US$500,000), at ten percent (10%) interest per annum commencing on date of execution (the “Effective Date”), due and payable by the Company in eight (8) separate equal quarterly payments of Sixty-Two Thousand Five Hundred Dollars (USD $62,500), plus accrued interest to date, due on the first day of each quarter beginning on the date of the first quarter following the date of execution of this Original Baker Myers Note, convertible into shares of the Company’s common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, subject to aggregate conversion limitations of 4.99% and other terms and conditions set forth therein At September 30, 2016, the principal was $500,000 with total accrued interest at $69,777.

 

 
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NOTE 9. CONVERTIBLE PROMISSORY NOTES

 

JSJ Investments Inc.

 

On June 11, 2015, the Company issued a 12% Convertible Note (the “JSJ Note”) to JSJ Investments, Inc, (“JSJ”) in the principal amount of $100,000 receiving cash proceeds of $88,000 after payment of related legal and broker fees. The JSJ Note bears interest at the rate of 12% per annum, and was due December 11, 2015 (the “Maturity Date”). The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. Pursuant to ASC 815, “Derivatives and Hedging”. On the Maturity Date Company recognized a derivative liability of $91,388 based on the Black-Scholes pricing model and recorded a corresponding derivative loss of the same amount. JSJ is entitled to convert all the outstanding and unpaid principal amount of the Note into Common Stock at a 45% discount to the lowest trading price during the previous twenty (20) trading days to the date of the conversion notice. JSJ converted $14,417 of the principal into common stock after the maturity date and as of December 31, 2015, the balance outstanding on the JSJ Note was $85,583 and, accrued interest was $6,625. On January 28, 2016, JSJ made a formal demand for repayment of the Note payable by February 26, 2016 and has threatened litigation if payment is not tendered. This could be considered an event of default where by JSJ could enforce the Company to redeem all or any portion of the Note so demanded (including all accrued and unpaid interest), in cash, at a price equal to 150% of the outstanding balance, plus accrued Interest and Default Interest and any other amounts then due under this Note. As of September 30, 2016, the balances outstanding on the JSJ Note were principal of $79,310, accrued interest was $14,290.

 

LG Capital Funding, LLC

 

On June 16, 2015, the Company issued a 6% Convertible Note (the “LG Note”) to LG Capital Funding, LLC (“LG”) in the principal amount of $52,500 receiving cash proceeds of $45,000 after payment or related legal and broker fees. The LG Note bears interest at the rate of 6% per annum and is due June 16, 2016 (the “Maturity Date”). The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. Pursuant to ASC 815, “Derivatives and Hedging. Based on the Black-Scholes pricing model, the Company recognized the fair value of the embedded conversion feature of $73,459 as a derivative liability on the date in which the note become convertible on December 16, 2015. The Company recorded a debt discount in the amount of $48,412 and a one day derivative expense of $25,047 in connection with the initial valuation of the derivative liability, to be amortized utilizing the effective interest method of accretion over the term of the Note. The conversion features of the note are at price equal to 58% of the lowest closing bid price of our common stock for the ten trading days on or prior to the date upon which notice of conversion is received. After the conversion date loan cannot be paid back in cash unless expressly permitted by LG Capital. As of September 30, 2016, the balances outstanding on the LG Note were principal of $42,239, accrued interest was $3,303 and the note discount was $0. At the time of the filing of this Report, LG Capital has converted a total of $10,261of the principal and interest of $281 into shares of the Company’s common stock, resulting in principal balance remaining of $42,239 and accrued interest of $3,303.

 

 
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Adar Bays, LLC

 

On June 16, 2015, the Company issued a 6% Convertible Note (the “Adar Note”) to Adar Bays, LLC (“Adar”) in the principal amount of $52,500 receiving cash proceeds of $45,000 after payment or related legal and broker fees. The Adar Note bears interest at the rate of 6% per annum and is due June 16, 2016 (the “Maturity Date”). The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. Pursuant to ASC 815, “Derivatives and Hedging. Based on the Black-Scholes pricing model, the Company recognized the fair value of the embedded conversion feature of $73,459 as a derivative liability on the date in which the note become convertible on December 16, 2015. The Company recorded a debt discount in the amount of $48,412 and a one day derivative expense of $25,047 in connection with the initial valuation of the derivative liability, to be amortized utilizing the effective interest method of accretion over the term of the Note. The conversion features of the note are at price equal to 58% of the lowest closing bid price of our common stock for the ten trading days on or prior to the date upon which notice of conversion is received. After the conversion date loan cannot be paid back in cash unless expressly permitted by Adar Bays, LLC. As of September 30, 2016, the balances outstanding on the Adar Note were principal of $14,787, accrued interest was $2,649 and the loan discount was $0. At the time of the filing of this Report, Adar has converted a total of $37,713 principal into shares of the Company’s common stock, resulting in principal balance remaining of $14,787and accrued interest of $2,649.

 

EMA Financial, LLC

 

On July 14, 2015, (the “Note Issuance Date”), the Company entered into a Securities Purchase Agreement (the “SPA”) with EMA Financial, LLC (“EMA”), whereby EMA agreed to invest $156,500 (the “Note Purchase Price”) in our Company in exchange for a convertible promissory note (the “Note”). The Company netted cash proceeds $135,000 after brokerage and legal fees aggregating $21,500 was disbursed at closing. Additionally, the Company issued to EMA 100,000 shares of Common Stock of the Company as a loan fee. Pursuant to the SPA, on July 14, 2015, we issued a convertible promissory note (the “Note”) to EMA, in the original principal amount of $156,500 (the “Note Purchase Price”), which bears interest at 12% per annum. All outstanding principal and accrued interest on the Note is due and payable on the maturity date, which is July 14, 2016 (the “ Maturity Date”). EMA may extend the Note Maturity Date by providing written notice at least five days before the Note Maturity Date. However, EMA may only extend the Note Maturity Date for up to an additional one-year period. Any amount of principal or interest that is due under the Note, which is not paid by the Note Maturity Date, will bear interest at the rate of 24% per annum until it is paid (the “Note Default Interest”). The Note is convertible by EMA into shares of our common stock at any time on the date which is six (6) months following the Issue Date (“Prepayment Termination Date”). At any time before the Prepayment Termination Date, the Company shall have the right, exercisable on not less than five (5) Trading Days prior written notice to EMA of this Note, to prepay the outstanding balance on this Note (principal and accrued interest), in full. The conversion price is the lower of: i) the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately preceding the closing date, and (ii) 60% of the lowest sale price for the Common Stock on the Principal Market during the 20 consecutive Trading Days immediately preceding the Conversion Date. EMA does not have the right to convert the Note into Common Stock if such conversion would result in EMA’s beneficial ownership exceeding 4.9% of our outstanding Common Stock at that time. As of September 30, 2016, the balance outstanding on the Note was $141,586, accrued interest was $22,234 and the loan discount was $0. At the time of the filing of this Report, EMA has converted a total of $14,914 of principal into shares of the Company’s common stock, resulting in a principal balance remaining of $141,586 and accrued interest of $22,241.

 

 
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Birch First Capital Fund, LLC

 

Litigation

 

On August 16, 2013, Birch First Capital Fund, LLC and/or Birch First Capital Management, LLC (“Birch First”) filed a complaint against the Company in the 15th Judicial Circuit of Florida (2013 CA 012838) alleging breach of contract under a Line of Credit Agreement (“LOC”) totaling $151,000. On November 18, 2013, Birch First brought a lawsuit in the 15th Judicial Circuit of Florida against Mr. Charles Cronin and Dr. Earl Beaver (former officers and directors of the Company), naming the Company as a nominal defendant. A motion to dismiss was filed by the Company concerning this derivative lawsuit, which is still currently pending. On July 23, 2015, the Parties finalized the settlement agreements, which lead to the conclusion of Case 2013 CA 012838.

 

Settlement

 

On July 23, 2015, the Company and Birch First Capital Fund LLC (“Birch First Capital”), a Delaware limited liability company and Birch First Advisors LLC, a Delaware limited liability company (“Birch Advisors”), executed a Settlement and Stipulation Agreement (the “Settlement Agreement”) dated July 21, 2015, pursuant to which the parties dismissed, with no liability admitted or deemed to be admitted by any party, any and all claims that have been, or could have been, raised in the outstanding litigation between the parties (the “Litigation”).

 

On July 23, 2015, pursuant to the terms and conditions of the Settlement Agreement, the Company executed an amended and restated convertible debenture (the “Amended and Restated Note”) dated July 21, 2015 in the total amount of $300,000 bearing two percent (2%) interest per annum for a period of two years for the benefit of Birch First Capital. Pursuant to the terms of the Amended and Restated Note, $75,000 of the principal balance would be immediately converted at $0.10 per share for a total of 750,000 shares of the Company’s Common Stock issued within five (5) days from the date of execution of the Settlement Agreement. The remaining $225,000 in principal and interest of the Amended and Restated Note will be convertible on a quarterly basis in the amount of $37,500 into shares of the Company’s Common Stock at a share price equal to the lesser of $0.10 per share, or fifty percent (50%) of the three (3) lowest intraday trading average for the twenty (20) day trading period prior to each conversion date, until paid in full, with accrued and unpaid interested due and payable in the final payment, under certain terms and conditions set forth in the Amended and Restated Note. The Company recognized and expensed non-cash settlement fees aggregating $85,842.

 

The original note contains an embedded conversion option and is separated from the Note and accounted for as a derivative instrument at fair value and discount to the Note. Using the Black-Scholes option pricing model, the fair market value of the of the of the embedded conversion option at inception was determined to be $472,028 with the following assumptions: risk-free rate of interest of .711%, expected life of 2.0 years, expected stock price volatility of 175.371%, and expected dividend yield of zero. The initial carrying value of the embedded conversion option was $472,028 exceeded the note and $225,000 was attributed to the note discount and $247,028 to a one day derivative loss.

 

The parties agreed to amend certain parts of the Amended and Restated Note. As of December 31, 2015, Birch and the Company had not specified the terms of any such amendment, but, at the mutual agreement of the parties, no shares have been issued pursuant to the Amended and Restated Note. As of September 30, 2016, the balance outstanding on the Note was $400,000, accrued interest was $45,287.

 

Birch Advisors, LLC

 

On July 23, 2015, pursuant to the terms and conditions of the Settlement Agreement referenced herein, the Company executed a new Consulting and Advisory Agreement (the “Agreement”) dated July 21, 2015 with Birch Advisors, LLC (“Consultant”) for a period of twenty-four (24) months to commence upon the execution date of the signed Agreement, payable in the form of a convertible debenture (“New Note”) in the amount of $300,000 at two percent (2%) interest per annum for a period of two years. Pursuant to the Agreement, Consultant shall be paid  $37,500 each quarter in the form of a reduction of the outstanding principal balance of the New Note, convertible into shares of the Company’s Common Stock at a share price equal to the lesser of $0.10 per share or a twenty-five (25%) discount of the three (3) lowest intraday trading average for the twenty (20) day trading period prior to each conversion date, until paid in full, with accrued and unpaid interest due and payable in the final payment.

 

 
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The Consultant will perform advisory and consultation services to the Company, including, but not limited to, assisting Company’s management with general corporate operations, business development strategies, marketing and business plans, SEC compliance and advising the Company on other ad-hoc matters as appropriate. The parties agreed that either the Company or Consultant may request a quarterly review by a designated third party reviewer, whom shall determine if the Company has the right to terminate the Agreement earlier for non-performance by the Consultant. The Agreement also contains other customary and standard provisions. The convertible note liability will be recorded as the quarterly benchmarks are reached.

 

The original note contains an embedded conversion option and is separated from the Note and accounted for as a derivative instrument at fair value and discount to the Note. Using the Black-Scholes option pricing model, the fair market value of the of the of the embedded conversion option at inception was determined to be $84,267 with the following assumptions: risk-free rate of interest of .711%, expected life of 1.69 years, expected stock price volatility of 170.599%, and expected dividend yield of zero. The initial carrying value of the embedded conversion option was $84,267 and exceeded the note and $72,267 was attributed to the note discount and $12,000 was recorded one day derivative loss.

 

The parties agreed to amend certain parts of the New Note that would mutually benefit each party. As of December 31, 2015, the Consultant and the Company had not specified the terms of any such amendment, but, at the request of the Consultant, no shares have been issued pursuant to the New Note. Birch completed the services during the year ended December 31, 2015, and the parties have mutually agreed to not issue the shares payable at this time. The Note payable is accrued by quarter since it depends on the services being performed. At September 30, 2016, the principal and accrued interest under the Note was $300,000 and $34,202, respectively.

 

First Amendment to the Settlement Agreement

 

On May 18, 2016, the Company and Birch First Capital Fund LLC (“Birch First Capital”) and Birch First Advisors LLC (“Birch Advisors”) executed the First Amendment to the Settlement Agreement (the “First Amendment”), pursuant to which the parties mutually agreed to amend and restate the amended and restated convertible debenture (the “Original Amended Note”) in the original amount of USD $300,000 (the “Original Amended Note Amount”), the convertible debenture (the “Original New Note”) in the original amount of USD $300,000 (the “Original New Note Amount”) and the original consulting agreement (the “Original Consulting Agreement”) dated on or about July 23, 2015, to reflect the following: (a) the execution of an Amended and Restated Convertible Redeemable Note (the “Amended and Restated Redeemable Note No.1”) in the principal amount of USD $400,000, at a rate of ten percent (10%) per annum commencing on July 23, 2015, convertible into shares of the Company’s common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, and other terms and conditions set forth therein, (b) the issuance by Company to Birch First Capital a three-year “cashless” stock purchase warrant (the “Warrant No.1”) for the right to purchase a total of 4,000,000 shares of Series B preferred Stock of the Company (the “Preferred Warrant Shares”), at a purchase price of $0.001 per share, on the terms and conditions set forth therein, (c) the execution of an Amended and Restated Convertible Redeemable Note (the “Amended and Restated Redeemable Note No. 2”) in the principal amount of USD $300,000, at a rate of ten percent (10%) per annum commencing on July 23, 2015, convertible into shares of the Company’s common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, subject to aggregate conversion limitations of 4.99% and other terms and conditions set forth therein, (d) the execution of an Amended and Restated Consulting Agreement (the “Amended and Restated Consulting Agreement”) on the terms and conditions set forth therein, including, but not limited to, for a period of twenty-four (24) months, with consideration payable to Birch Advisors and/or its assigns in cash in the amount of Ten Thousand Dollars ($10,000.00) per month, including, any and all payments set forth Amended and Restated Redeemable Note No.2, and the issuance by the Company to Birch First Advisors and/or assigns a three-year “cashless” stock purchase warrant (the “Warrant No.2”) for the right to purchase up to 1,000,000 shares of common stock of the Company (the “Common Warrant Shares”) each month a strike price of $0.001 per share (the “Exercise Price”), and (e) the acceptance by the Company of the execution of the Assignment of Amended and Restated Redeemable Note No.2 (hereinafter referred to as the “Assigned Note”) between Birch Advisors and Birch First Capital, in which Birch Advisors agreed to assign the ownership interest of Assigned Note to Birch First Capital, on the terms and conditions set forth therein, of which the Company was not a party, however, provided consent at the request of Birch Advisors and Birch First Capital. In addition, each of the agreements contains customary representations and warranties provisions.

 

 
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NOTE 10. DERIVATIVE INSTRUMENT LIABILITIES

 

The fair market value of the derivative instruments liabilities at September 30, 2016, was determined to be $1,437,544 with the following assumptions: (1) risk free interest rate of .20%, (2) remaining contractual life of years from .01, (3) expected stock price volatility of 307%, and (4) expected dividend yield of zero. Based upon the change in fair value, the Company has recorded a loss on derivative instruments for the nine months ended September 30, 2016, of $1,668,698 and a corresponding increase in the derivative instruments liability.

 

NOTE 11. COMMITMENTS

 

Stock Compensation for investor relations services

 

On December 3, 2014, the Company entered into an Investor Relations Consulting Agreement (the “Agreement”) with EraStar Inc. (“EraStar”). Under the terms of the Agreement, the Company had the ability to challenge performance under the contract to an independent referee within certain timelines, which the Company initiated on January 21, 2015 (the “Termination Date”). As a result of the ruling in favor of the Company by the independent referee, the entire Agreement was cancelled.

 

NOTE 12. FAIR VALUE MEASUREMENT

 

The Company values its derivative instruments under FASB ASC 820 which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

 

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 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 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.

 

 
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The Company’s financial instruments consisted of cash, prepaid expense, deposit, accounts payable and accrued liabilities, line of credit, loan from stockholders and convertible debt. The estimated fair value of cash, prepaid expense, deposit, accounts payable and accrued liabilities, line of credit, loan from stockholders approximates its carrying amount due to the short maturity of these instruments. The recognition of the derivative values of convertible debt are based on the weighted-average Black-Scholes option pricing model, which the Company’s classifies as a level three of the fair value measurement hierarchy.

 

The derivative liabilities are measured at fair value using quoted market prices and estimated volatility factors based on historical quoted market prices for the Company’s common stock, and are classified within Level 3 of the valuation hierarchy.

 

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2015.

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Derivative Liabilities

 

$ -

 

 

$ -

 

 

$ 1,043,217

 

 

$ 1,043,217

 

 

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of September 30, 2016.

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Derivative Liabilities

 

$ -

 

 

$ -

 

 

$ 1,437,544

 

 

$ 1,437,544

 

 

As of September 30, 2016, the Company had a derivative liability amount of $1,437,544 which was classified as a Level 3 financial instrument.

 

NOTE 13. EQUITY INCENTIVE PLAN

 

Effective October 15, 2015, the Company adopted the Equity Incentive Plan (the “Plan”) whereby the Company may issue common stock, not to exceed 25,000,000 shares of common stock of the Company (the “ Stock Award “ or “ Stock Awards “), or grant options to acquire common stock of the Company (the “ Option “ or “ Options “), (the “ Stock “), which may be in the form of Stock Awards, or “incentive stock options” (“ ISOs “) intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “ Code “), or “non-qualified stock options” (“ NQSOs “).

 

Pursuant to the Plan, the exercise price of stock awards or options granted under the plan which are designated as NQSO’s shall not be less than 85% of the fair market value of the stock subject to the Option on the date of grant, and not less than 65% of the fair market value of the stock subject to the Stock Award on the date of grant. To the extent required by applicable laws, rules and regulations, the exercise price of a NQSO granted to any person who owns, directly or by attribution of stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or of any Subsidiary (a “Ten Percent Stockholder”) shall in no event be less than 110% of the fair market value of the stock covered by the Stock Award or Option at the time the Stock Award or Option is granted.

 

Pursuant to the Plan, the exercise price of stock awards or options granted under the Plan which are designated as ISO’s shall not be less than the fair market value of the stock covered by the stock award or option at the time the option is granted. The exercise price of an ISO granted to any Ten Percent Stockholder shall in no event be less than 110% of the fair market value.

 

The fair market value is defined as the closing price of such stock on the date before the date the value is to be determined on the principal recognized securities exchange or recognized securities market on which such stock is reported. If selling prices are not reported, its fair market value shall be the mean between the high bid and low asked prices for such stock on the date before the date the value is to be determined (or if there are no quoted prices for such date, then for the last preceding business day on which there were quoted prices). If there is no established market for the stock, the fair market value will be determined in good faith by the Administer. The Administer will either be the Board of Directors or an Administer appointed by the Board of Directors. We do not have outstanding stock awards or options to purchase shares of our common stock under the Plan at September 30, 2016.

 

 
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NOTE 14. STOCKHOLDERS’ EQUITY

 

Authorized

 

The Company is authorized to issue 250,000,000 shares of preferred stock, having a par value of $0.0001 per share, and 500,000,000 shares of common stock, having a par value of $0.0001 per share.

 

Effective October 15, 2015, the Company Restated its Articles of Incorporation and Bylaws, and Equity Incentive Plan increasing the total number of shares of stock of all classes which we shall have authority to issue from 60,000,000 shares to 750,000,000 shares, of which the Common Stock, $0.0001 par value per share, was increased from 50,000,000 shares to 500,000,000 shares (hereinafter called “Common Stock”) and of which the Preferred Stock, $0.0001 par value per share, was increased from 10,000,000 shares to 250,000,000 shares (hereinafter called “Preferred Stock”).

 

On May 17, 2016, the Company filed a Designation of Rights and Preferences for Series B Preferred stock authorizing 100,000,000 share to be issued under this designation. The Series B Preferred shares have a par value $.0001 and are senior to all other shares authorized by the Company. These share vote as if converted at a ratio of 1:1,000 and vote as a single class.

 

Issued and Outstanding

 

Preferred Stock

 

At September 30, 2016, the Company had 2,100,000 shares of Series B Preferred Stock outstanding.

 

On May 18, 2016, the Company authorized the issuance of 2,000,000 shares of Series B Preferred Stock to two (2) separate parties in the amount of 1,000,000 shares each to Ricketts and Antol, respectively, pursuant to the executed Ricketts Subscription Agreement and Antol Subscription Agreement. The Series B Preferred shares were offered and sold to the parties in a private placement transaction in reliance upon exemptions from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. The Company based such reliance on certain representations made by each of the parties to the Company including that each of the parties were accredited investors as defined in Rule 501 of Regulation D. These shares are recorded in the financial statements for the nine months ended September 30, 2016.

 

On August 26, 2016, the Company authorized the issuance 50,000 shares of Series B Preferred Stock each to Watson and Mix pursuant to the WOD agreement. The Series B Preferred shares were offered and sold to the parties in a private placement transaction in reliance upon exemptions from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. The Company based such reliance on certain representations made by each of the parties to the Company including that each of the parties were accredited investors as defined in Rule 501 of Regulation D. These shares are recorded in the financial statements for the nine months ended September 30, 2016.

 

Common Stock

 

At September 30, 2016, the Company has 136,518,799 shares of common stock issued and outstanding.

 

During the nine months ended September 30, 2016, the Company issued 108,796,533 shares of common stock for the conversion of $61,161 and $ 281 in accrued interest.

 

 
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Reverse Stock Split

 

Effective October 15, 2015, the Board of Directors under their sole discretion by Board Resolution and applicable FINRA requirements may initiate a 1:1,000 Reverse Split, the number of shares of capital stock issued and outstanding will be reduced to the number of shares of capital stock issued and outstanding immediately prior to the effectiveness of a Reverse Split, divided by up to one thousand (1,000). Each fractional share shall be rounded up to the nearest whole share. There will be no change to the number of authorized shares of Common Stock and Preferred Stock as a result of a Reverse Split. With the exception of the number of shares issued and outstanding, the rights and preferences of the shares of capital stock prior and subsequent to a Reverse Split will remain the same. It is not anticipated that the Company’s financial condition, the percentage ownership of management, the number of shareholders, or any aspect of the Company’s business would materially change, solely as a result of a Reverse Split.

 

Pursuant to Form 8K filed with the SEC on November 2, 2015, the Company stated that “[e]ffective October 15, 2015, the Company effectuated the actions contained in this Section hereinabove. Although, the corporate action described did include the approval by the voting shareholders of a reverse stock split of up to 1 for 1,000, such effectuated action did not effect an actual (or specific) reverse split on such date, but rather provided for a future approval only. Subject to such approval, the Board of Directors were granted the right to effect a reverse split at any time during the following one year period, at a ratio (between 1 for 1,000), and on such determined “effective date” deemed appropriate by the Board Directors, at such time (which subsequently was determined later to be August 26, 2016).

 

On August 26, 2016, the Board of Directors decided that it was in the best interest of the Company to approve a reverse split of the Company’s Common Stock at a specified ratio of 1:1,000, as a condition of the execution of WOD Definitive Agreement, as described more fully under Subsequent Events in Item 12 herein, pursuant to the prior approval effective as of October 15, 2015, as referenced in Form 8K filed with the SEC on September 2, 2016. Further, the Company confirmed that at the effective time of the reverse stock split, all of the outstanding shares of our outstanding Common Stock were automatically converted into a smaller number of shares, at the reverse split ratio of 1:1,000, on the effective date.

 

However, due to the fact, that on August 26, 2016, the Company was delinquent on certain required SEC quarterly filings for year ending 2016, it was determined by the Board of Directors that the “effective date” of the reverse stock split, could not be the same date as the approval date of August 26, 2016, and therefore, the “effective date” had to be postponed until such time as the Company became current as a fully reporting company. Separately, until the Company was current on its filings, the Company could not notify its shareholders about the “effective date” of the reverse split, which would also be subject to approval by FINRA.

 

Therefore, the Company advises that it intends to define an “effective date” of the reverse stock split as soon as possible after the Company becomes current as a fully reporting company, and complete the required filing with the State of Florida, at which time notice of the “effective date” will be provided to the Company’s shareholders under Form 8K and FINRA, as applicable.

 

Holders of record of the Common Stock and Series B Convertible Preferred Stock at the close of business on the Record Date were entitled to participate in the written consent of our shareholders. Each share Common Stock was entitled to one vote and each share of Series B Convertible Preferred Stock was entitled to vote 1:1,000 to each share of Common Stock.

 

Reverse Split

 

On the effective date of the Reverse Split, as determined by the Company when applicable (the “Effective Date”), all of the outstanding shares of our outstanding Common Stock were automatically converted into a smaller number of shares, at the reverse split ratio of 1:1,000.

 

 
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The Reasons for the Reverse Split

 

The Reverse Split was intended to reduce the number of outstanding shares in an effort to increase the market value of the remaining outstanding shares. In approving the Reverse Split, the Directors considered that the Company’s Common Stock may not appeal to brokerage firms that are reluctant to recommend lower priced securities to their clients. Investors may also be dissuaded from purchasing lower priced stocks because the brokerage commissions, as a percentage of the total transaction, tend to be higher for such stocks. Moreover, the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower priced stocks. The Directors also believed that most investment funds are reluctant to invest in lower priced stocks.

 

However, the effect of the Reverse Split upon the market price for the Company’s Common Stock cannot be predicted with certainty, and the history of similar stock split combinations for companies in like circumstances is varied. There can be no assurance that the market price per share of the Company’s Common Stock after the Reverse Split will rise in proportion to the reduction in the number of shares of Common Stock outstanding resulting from the Reverse Split. The market price of the Company’s Common Stock may also be based on its performance and other factors, some of which may be unrelated to the number of shares outstanding.

 

Potential Risks of The Reverse Split

 

There can be no assurance that the bid price of the Company’s Common Stock will continue at a level in proportion to the reduction in the number of outstanding shares resulting from the Reverse Split, that the Reverse Split will result in a per share price that will increase its ability to attract employees and other service providers or that the market price of the post-split Common Stock can be maintained. The market price of the Company’s Common Stock is also based on its financial performance, market condition, the market perception of its future prospects and the Company’s industry as a whole, as well as other factors, many of which are unrelated to the number of shares outstanding. If the market price of the Company’s Common Stock declines after the Reverse Split, the percentage decline as an absolute number and as a percentage of the Company’s overall capitalization may be greater than would occur in the absence of a Reverse Split.

 

Potential Effects of The Reverse Split

 

For each holder of Common Stock, the number of shares held on the Effective Date will be reduced by the Reverse Split as follows: the number of shares held before the Reverse Split will be divided by 1,000, and if the result had a fractional component, the result is that cash will be given in lieu of any fractional shares. By way of example, a shareholder with 100,000 shares of Common Stock before the Reverse Split will hold 100 shares of Common Stock upon completion of the Reverse Split and will receive cash in lieu of the fractional remaining share.

 

The issuance of cash in lieu of fractional shares will effect a small change in the relative percent ownership of the respective common shareholders. This change is not expected to be material.

 

Accounting Matters. The par value of the Company’s Common Stock remained unchanged at $0.0001 per share after the Reverse Split. Also the capital account of the Company remained unchanged, and the Company does not anticipate that any other accounting consequences would arise as a result of the Reverse Split.

 

Effect on Authorized and Outstanding Shares. Based on the stockholdings of shares of Common Stock issued and outstanding on the Effective Date. As a result of the Reverse Split, the number of shares of capital stock issued and outstanding (as well as the number of shares of Common Stock underlying any options, warrants, convertible debt or other derivative securities) on the Effective Date will be reduced to the number of shares of capital stock issued and outstanding immediately prior to the effectiveness of the Reverse Split, divided by one thousand (1,000), minus any shares that were eliminated with cash in lieu of fractional shares. \

 

With the exception of the number of shares issued and outstanding, the rights and preferences of the shares of capital stock prior and subsequent to the Reverse Split will remain the same. It is not anticipated that the Company’s financial condition, the percentage ownership of management, the number of shareholders, or any aspect of the Company’s business would materially change, solely as a result of the Reverse Split. The Reverse Split will be effectuated simultaneously for all of the Company’s Common Stock and the exchange ratio was the same for all shares of the Company’s Common Stock. The Reverse Split will affected all of our shareholders uniformly and did not affect any shareholder’s percentage ownership interests in the Company or proportionate voting power, except to the extent caused by the exchange of cash in lieu of fractional shares. The Reverse Split will not alter the respective voting rights and other rights of shareholders.

 

 
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The Reverse Split was not intended as, and will not have the effect of, a “going private transaction” covered by Rule 13e-3 under the Exchange Act.

 

As a result of the Reverse Split, there was a reduction in the number of shares of Common Stock issued and outstanding and no change to the number of authorized shares of the Company’s Common Stock under the Company’s Articles of Incorporation, as amended. Because the number of issued and outstanding shares of Common Stock decreased, the number of shares of Common Stock remaining available for issuance in the future increased.

 

Effectiveness of the Reverse Split

 

Exchange of Certificates After Split. It will not be necessary for stockholders to exchange their old certificates. However, those stockholders who wish to obtain new certificates should contact the transfer agent, Manhattan Transfer Registrar Company, 57 Eastwood Road, Miller Place, NY 11764, Phone: (631) 928-7655.

 

Tax Impact of the Reverse Split. The following discussion summarizing material federal income tax consequences of the Reverse Split is based on the Internal Revenue Code of 1986, as amended (the “Code”), the applicable Treasury Regulations promulgated thereunder, judicial authority and current administrative rulings and practices in effect on the date this Information Statement was first mailed to shareholders. This discussion does not discuss consequences that may apply to special classes of taxpayers (e.g., non-resident aliens, broker-dealers, or insurance companies). Stockholders should consult their own tax advisors to determine the particular consequences to them.

 

The receipt of the Common Stock following the effective date of the Reverse Split, solely in exchange for the Common Stock held prior to the Reverse Split, will not generally result in recognition of a gain or loss to the shareholders. Although the issue is not free from doubt, additional shares received in lieu of fractional shares, including shares received as a result of the rounding up of fractional ownership, should be treated in the same manner. The adjusted tax basis of a shareholder in the Common Stock received after the Reverse Split will be the same as the adjusted tax basis of the Common Stock held prior to the Reverse Split exchanged therefor, and the holding period of the Common Stock received after the Reverse Split will include the holding period of the Common Stock held prior to the Reverse Split exchanged therefor.

 

No gain or loss will be recognized by the Company as a result of the Reverse Split. The Company’s views regarding the tax consequences of the Reverse Split are not binding upon the Internal Revenue Service or the courts, and there can be no assurance that the Internal Revenue Service or the courts would accept the positions expressed above.

 

THIS SUMMARY IS NOT INTENDED AS TAX ADVICE TO ANY PARTICULAR PERSON. IN PARTICULAR, AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY ASSUMES THAT THE SHARES OF COMMON STOCK ARE HELD AS “CAPITAL ASSETS” AS DEFINED IN THE CODE, AND DOES NOT CONSIDER THE FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY’S SHAREHOLDERS IN LIGHT OF THEIR INDIVIDUAL INVESTMENT CIRCUMSTANCES OR TO HOLDERS WHO MAY BE SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS (SUCH AS DEALERS IN SECURITIES, INSURANCE COMPANIES, FOREIGN INDIVIDUALS AND ENTITIES, FINANCIAL INSTITUTIONS AND TAX EXEMPT ENTITIES). IN ADDITION, THIS SUMMARY DOES NOT ADDRESS ANY CONSEQUENCES OF THE REVERSE SPLIT UNDER ANY STATE, LOCAL OR FOREIGN TAX LAWS. THE STATE AND LOCAL TAX CONSEQUENCES OF THE REVERS SPLIT MAY VARY AS TO EACH STOCKHOLDER DEPENDING ON THE STATE IN WHICH SUCH STOCKHOLDER RESIDES. AS A RESULT, IT IS THE RESPONSIBILITY OF EACH SHAREHOLDER TO OBTAIN AND RELY ON ADVICE FROM HIS, HER OR ITS TAX ADVISOR AS TO, BUT NOT LIMITED TO, THE FOLLOWING: (A) THE EFFECT ON HIS, HER OR ITS TAX SITUATION OF THE REVERSE SPLIT, INCLUDING, BUT NOT LIMITED TO, THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS; (B) THE EFFECT OF POSSIBLE FUTURE LEGISLATION OR REGULATIONS; AND (C) THE REPORTING OF INFORMATION REQUIRED IN CONNECTION WITH THE REVERSE SPLIT ON HIS, HER OR ITS OWN TAX RETURNS. IT WILL BE THE RESPONSIBILITY OF EACH SHAREHOLDER TO PREPARE AND FILE ALL APPROPRIATE FEDERAL, STATE AND LOCAL TAX RETURNS.

 

 
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Share Certificates

 

Following the Reverse Split, the share certificates held will continue to be valid. In the future, new share certificates will reflect the reverse split, but this in no way will affect the validity of current share certificates.

 

Warrants Issued for Services

 

As of September 30, 2016, the Company had various outstanding warrant.

 

The following table summarizes the warrant activity for the nine months ended September 30, 2016:

 

Balance December 31, 2015

 

 

2,307

 

 

$ 259

 

Granted

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

Expired/ Cancelled

 

 

(2,307 )

 

 

(259 )

Balance September 30, 2016 

 

 

-

 

 

$ -

 

 

Warrants Issued In Settlements

 

Balance December 31, 2015

 

 

-

 

 

$ -

 

Granted Preferred

 

 

7,000,000

 

 

 

700

 

Granted Common

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

Expired/ Cancelled

 

 

 

 

 

 

 

 

Balance September 30, 2016 

 

 

7,000,000

 

 

 

700

 

 

NOTE 14. ACQUISITION

 

Gaming License and Securities Purchase Agreement

 

On April 4, 2015, the Company entered into a Securities Purchase Agreement (the “Agreement”) and Promissory Note (the “Note”) with H y H Investments, S.A. (the “Seller”) for the purchase of all outstanding securities of El Muerto Beauty Mineral, Sociedad Anonima (hereafter “EMBM”) whose sole asset consists of a license to operate 80 gaming machines in two cities on the Honduras mainland and 160 gaming machines in Roatan, the largest of the bay islands of Honduras. The total purchase price for the acquisition was Ten Million Dollars ($10,000,000) payable in the form of a Promissory Note (the “Note”). Upon the signing of the Agreement and Note, the $100,000 funds in escrow were paid to the Seller under the terms of the Note. The Company owes no further obligation under the terms of the Note until April 6, 2016, at which time $900,000 is due to the Seller, payable in the form of cash or shares of common stock of the Company at the average closing price of the common stock of the Company for the five trading days immediately preceding April 6, 2016. The remaining balance under the Note is payable up to $2,500,000 per year thereafter through March 31, 2021 by either cash payments or by a revenue-share of 25% of the net revenues received by EMBM during such time period. In the event that Seller has not received the full amount due on or before March 31, 2021, such amount due may be payable via the issuance of the Company’s shares of common stock at the average closing price of the Company’s common stock for the five trading days immediately preceding March 31, 2021. Beginning on or after April 17, 2017, payments tendered in the form of Company common stock may be repurchased by the Company given the Seller’s approval with the purchase price being the value of the shares at the corresponding payment date. The Company is not obligated to re-purchase the shares. The Seller agreed to waive interest payments of 3.85% per annum, due in monthly installments, in exchange for a sub-license granting the Seller usage of twenty-five (25) machines in the municipality of Roatan.

 

 
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First Amendment; Securities Purchase Agreement and Note

 

On September 30, 2015, the Company amended the Note and SPA to reflect a due date of April 6, 2016 in conjunction with the first payment of Nine Hundred Thousand Dollars ($900,000), which is due in either cash, stock, or 25% of the net revenues of EMBM’s operations. The Note was also amended to reflect the current purchase price owed was reduced to $9,900,000, which deducts the $100,000 non-refundable deposit tendered on April 6, 2015. The business purpose for this amendment was to allow the Company the proper time to incorporate a Honduras corporation to be in compliance with the laws of the Republic of Honduras to effectively be able to transact business in that municipality. The good-faith non-refundable deposit permitted negotiation for a commitment at a later date.

 

Second Amendment; Securities Purchase Agreement

 

Effective November 20, 2015, the Company signed a Second Amendment (the “Amendment”) to the Securities Purchase Agreement (the “Agreement”) with H y H Investments, S.A. (the “Seller”) regarding the acquisition of the gaming license whereby the Company re-assigned the Agreement to Elite Holdings S.A., a wholly owned subsidiary owned by the Company on a jointly and severally liable basis with the Company so as to comply with the regulatory authority of the Republic of Honduras. The Amendment also removed any Required Approvals on part of the Seller to enter into the Agreement. The Amendment specifies that as long as the Company is current in its payment obligations, upon good faith payment, Purchaser shall have the right to operate gaming machines permitted under the license and proceed with the use of the license as owner of EMBM with full power and authority to contract, license, sub-license, loan, lease, enter into contract or any other business venture in which entitles Purchaser to the benefit of the license on behalf of the Corporation. The Amendment also clarified that the shares of EMBM would be assigned to Elite Holdings, S.A. after the full purchase price had been tendered to the Seller. The Company will recognize the appropriate asset and liability when performance occurs on the effective date April 6, 2016.

 

Third Amendment; Securities Purchase Agreement and Joint Venture Agreement

 

On May 20, 2016, the Company and H Y H Investments, S.A. (“HYHI”) executed the Third Amendment to the Securities Purchase Agreement (the “Third Amendment”), pursuant to which the parties agreed to further clarify and amend and restate certain provisions of the Original Purchase Agreement, First Amendment and Second Amendment (the “Original Purchase Agreement”).

 

Pursuant to the terms of the Third Amendment, the parties mutually agreed to cancel the Original Purchase Agreement dated April 6, 2015, in exchange for a new Joint Venture Agreement (the “Joint Venture”) executed on even date therewith, pursuant to which the Company and HYHI agreed to create a joint venture relationship using Elite Data Holdings S.A., a Honduras corporation, a wholly-owned subsidiary of Elite Gaming Ventures LLC, a Florida limited liability company (“EVG”), a wholly-owned subsidiary of the Company, and a distributor license from HYHI and El Mar Muerto Beauty Mineral, S.A., a Honduras corporation (“EMBM”) to establish gaming operations (the “Purpose”) by distributing and maintaining a total of eighty (80) slot machines in the cities of La Lima, Cortes; eighty (80) slot machines in the cities of Trujillo, Colon; and One Hundred and Sixty (160) slot machines in Roatan in the bay island of Honduras.

 

 
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Pursuant to the terms of the Joint Venture, HYHI agreed to effect the distributor license (the “License”) related to the Purpose, provided that the Company and EVG would be responsible for providing any and all financial and operational resources required to execute on the License granted to the Company, including, but not limited to, the funding for the initial and ongoing operating costs in the minimum amount of Five Hundred Thousand Dollars (USD $500,000) on or before December 31, 2016 (the “Initial Funding”).

 

In addition, the Company and EVG agreed to pay HYHI consideration in the total amount of USD $10,000,000 (the “Total Consideration”), due and payable as follows:

 

(a) Initial Payment. An initial payment of $100,000, which was paid in the Original Purchase Agreement, as amended,

 

(b) Convertible Note. A further amendment and restatement of the amended and restated convertible note (the “Original Amended Note”), dated April 6, 2015, in the form of the amended and restated convertible redeemable note (the “Amended and Restated Redeemable Note”) to reflect the original issuance date of January 1, 2016 (the “Restated Issuance Date”), and a decrease in the original principal amount from Nine Million Nine Hundred Thousand Dollars (USD $9,900,000) to Four Million Nine Hundred Thousand Dollars (USD $4,900,000) (the “New Principal Amount”), at ten percent (10%) interest per annum, due and payable to HYHI by DEAC as follows: (A) two (2) separate payments of Four Hundred Fifty Thousand Dollars (USD $450,000), plus accrued interest to date, due on July 1, 2016 and October 1, 2016, respectively, for a total of Nine Hundred Thousand Dollars (USD $900,000), and payable in cash or convertible into shares of common stock of DEAC at a conversion price equal to the lesser of $0.01 per share or fifty percent (50%) to the five (5) trading day average closing price immediately preceding the payment date, and (B) the remaining balance of Four Million (USD $4,000,000) payable in cash in a total of eight (8) equal quarterly installments of Five Hundred Thousand Dollars (USD $500,000), plus accrued interest to date, on the first day of each quarter beginning with January 1, 2017 and ending on January 1, 2019, convertible into shares of common stock of DEAC at fifty percent (50%) discount to the five (5) trading day average closing price immediately preceding the payment date, and other terms more fully described in the amended note set forth in the Amended and Restate Redeemable Note.

 

(c) Revenue Share Plan. A revenue share split of any and all revenues derived from the Joint Venture (the “Revenue Share Plan”) on a basis equal to twenty-five percent (25%) to EGV, and seventy-five percent (75%) to HYHI until such time as HYHI has received payment in full of the Total Consideration, and thereafter one hundred percent (100%) of the revenues shall be paid to EVG, for the term of this Agreement. Notwithstanding anything herein to the contrary, EVG shall be required to pay HYHI certain minimum licensing fee payments (the “Minimum Licensing Fee Payments”) in the amount of Two Hundred Fifty Thousand Dollars (USD $250,000.00) due and payable to HYHI on or before 31st day of each quarter, beginning on January 1, 2017, if the total amount paid to HYHI in the then prior quarter from the seventy-five percent (75%) revenue split does not exceed that amount. In the event DEAC and EGV is unable to make the Minimum Licensing Fee Payments in full when due, DEAC shall pay HYHI the amounts owed in the form of the issuance of a new convertible redeemable note (the “Licensing Redeemable Note”) for each such occurrence, in the form and on the same terms and Maturity Date as set forth in the Amended and Restated Redeemable Note.

 

The Joint Venture also included the option of the Company and EVG to acquire the ownership of EMBM and License directly, within thirty (30) days of the date payment in full of the Total Consideration is made to HYHI pursuant to the Agreement, at which time, EVG and Company would have the right to exercise an option (the “Option”) to acquire one hundred percent (100%) of EMBM, including, but not limited to, any and all assets (e.g. gaming licenses, etc.), and liabilities required to continue the gaming operation set forth by the Joint Venture, for a purchase price of (USD $10.00) (the “Option Payment”), paid by the Company to HYHI. Upon receipt by HYHI of a written notice to exercise the Option and the Option Payment from EVG or Company, HYHI would execute any and all documents necessary to effect the assignment and transfer (the “EMBM Assignment”) of one hundred percent (100%) of EMBM, including, but not limited to, any and all assets and liabilities required to continue the gaming operation set forth by the Joint Venture, to the Company, free of any encumbrances, liens, or other third party claims related to the DEAC and EGV, except for the obligations incurred from and remaining in the Joint Venture after the Assignment.

 

 
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In the event of a termination, or if the Company is unable to provide the Initial Funding when due, or for a period not to exceed ninety (90) days in each monthly instance, the financial and operational resources needed to maintain the operations of the Company for its intended Purpose in an amount not less than Twenty-Five Dollars (USD $25,000) per month, less any revenues generated during such period, HYHI shall have the right to cancel the Joint Venture in writing, thus terminating any further obligations of the parties to this Agreement (the “Termination”), including the cancellation of any further Minimum Licensing Fee Payments and the combined total of any outstanding amounts owed by DEAC, in excess of One Million Dollars (USD$1,000,000.00), on the Amended and Restated Redeemable Note and all other Licensing Redeemable Notes, issued to HYHI which have not been converted, or otherwise assigned, sold or transferred by HYHI to one or more other parties prior to such Termination date.

 

Letter of Intent - WOD Market LLC

 

On July 22, 2016, the Company and WOD Market LLC (“WOD”), a Colorado limited liability company executed a Letter of Intent for the proposed acquisition by the Company of WOD in the form of a share exchange arrangement on terms to be set forth in a definitive agreement and other ancillary agreements as are customary to consummate the transaction contemplated (the “Definitive Documentation”), anticipated to be signed and closed on or before July 29, 2016.

 

Pursuant to the execution of the LOI, WOD agreed to arrange interim funding of no less than USD $40,000.00 for certain operational costs of the Company prior to closing, including expenses related to the completion of the Company’s outstanding Form 10K for year ending December 31, 2015, and Form 10Q for periods ending March 31, 2016 and June 30, 2016, and other such items required in order for the Company to become a fully reporting public company, to be advanced within five (5) business days from the date of the LOI, under mutually agreed to terms to be formalized in the Definitive Documentation.

 

Definitive Agreement for the Acquisition of WOD Markets LLC

 

On August 26, 2016, the Company and the controlling shareholders of WOD Market LLC (“WOD”), a Colorado limited liability company (“WOD”), executed a definitive agreement (the “WOD Definitive Agreement”), pursuant to which the Company agreed to acquire one hundred percent (100%) of the ownership interest in WOD, in the form of three (3) separate closings, subject to the following terms and conditions:

 

(a) First Closing. On August 26, 2016 (the “First Closing” or “Initial Closing”), the Company would acquire a total of twenty percent (20%) of the ownership interest of WOD in an equity exchange in which the controlling shareholders of WOD would assign and transfer a total of 200 units of membership interests (the “WOD Units”) to the Company in exchange for a total of 100,000 shares of Series B Preferred Stock of the Company (the “New DEAC Shares”), issued by the Company to the controlling shareholders of WOD.

 

In addition, within two (2) business days after the Initial Closing, WOD shall advance a total of Forty Thousand Dollars ($40,000) to DEAC for the purposes of funding the completion of DEAC’s audit and SEC filing of Form 10K for the period ending December 31, 2015, Form 10Q for period ending March 31, 2016, Form 10Q for period ending June 30, 2016, and other documentation required for DEAC to become a compliant and fully reporting public company (the “Interim Financing”), secured by two (2) separately executed Convertible Redeemable Notes (“WOD Notes”).

 

Further, as a condition of the execution of WOD Definitive Agreement, DEAC has agreed to immediately, as of August 26, 2016, initiate a reverse split of 1:1000 of DEAC’s Common Stock (the “Reverse Split”), pursuant to the prior approval received by DEAC from the holders of majority of DEAC’s outstanding capital stock, as described in the Schedule 14C filed with the SEC on September 23, 2015. The effective date of the reverse split is anticipated to commence on September 15, 2016, subject to final approval of FINRA. Subject to the completion of the Reverse Split, the Controlling Shareholders have agreed to exchange and cancel a total of 1,000,000 shares of Series B Preferred Stock (500,000 each by Dr. Ricketts and Mr. Antol) for a total of 25,000,000 shares of Common Stock of the DEAC to be issued post the date the Reverse Split is effective.

 

 
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(b) Second Closing. On or before September 15, 2016 (the “Second Closing”), the Company would acquire an additional total of twenty percent (20%) of the ownership interest of WOD in an equity exchange in which the controlling shareholders of WOD would assign and transfer an additional total of 200 WOD Units to the Company in exchange for an additional 100,000 New DEAC Shares, issued by the Company to the controlling shareholders of WOD.

 

In addition, the Second Closing would be contingent upon DEAC completing all necessary corporate actions to effect any and all outstanding DEAC corporate matters, including, but not limited to, SEC filing of Form 10K for the period ending December 31, 2015, Form 10Q for period ending March 31, 2016, Form 10Q for period ending June 30, 2016, and other documentation required for DEAC to become a compliant and fully reporting public company (the “SEC Filing”).

 

(c) Third Closing. On or before October 15, 2016 (the “Third Closing”), the Company would acquire a total of sixty percent (60%) of the ownership interest of WOD remaining in an equity exchange in which the controlling shareholders of WOD would assign and transfer a total of 600 WOD Units to the Company in exchange for a total of 14,800,000 New DEAC Shares, issued by the Company to the controlling shareholders of WOD.

 

In addition, the Third Closing would be contingent upon WOD completing all necessary corporate actions to effect any and all outstanding WOD corporate matters, including, but not limited to, two years of audit financials for period ending December 31, 2014 and December 31, 2015, and interim reviewed financial for period ending June 30, 2016, including interim reviewed financial for period ending September 30, 2016, in accordance with US GAAP (the “Books and Records”), in form acceptable to DEAC and its auditors. Separately, DEAC must be current with all federal tax return filings for periods ending 2013, 2014 and 2015 on or before the Third Closing.

 

Further, as a condition of the Final Closing, Dr. Ricketts (a Controlling Shareholder) has agreed to the termination of his contractor agreement dated May 18, 2016, as the Chairman and VP of Investor Relations of DEAC, and Mr. Antol (a Controlling Shareholder) has agreed to the termination of his contractor agreement dated May 18, 2016, as the Chief Financial Officer of DEAC, on mutually agreed to terms between DEAC and WOD prior to such closing.

 

Pursuant to the each of the closings contemplated, certain officer and director appointments and resignations shall commence on both the Second Closing and Third and Final Closing.

 

In the event of a termination of the Definitive Agreement after the First Closing or Second Closing, the Company is required to assign and transfer any and all WOD Units held by the Company back to the controlling shareholders of WOD, and WOD controlling shareholders is required to assign and transfer any and all New DEAC Shares back to Company. If WOD has arranged and completed any of the Interim Financings, then DEAC shall be required to abide by the terms of the Interim Financings, with neither party having any further obligations to one another thereafter, except as otherwise provided for herein.

 

NOTE 15. SUBSEQUENT EVENTS

 

Subsequent to our nine months ended September 30, 2016 and to the date of filing of this Report, the Company issued the following additional shares of common stock in connection with the convertible notes:

 

On June 7, 2017, the Company issued 13,500,000 common shares for the conversion of $1,477.50 of convertible debt.

 

 
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Separation and Settlement Agreements with Resigning Officers & Directors

 

On or about January 10, 2017, the Company and Charles Rimlinger, an individual (the former Chief Executive Officer and Director of the Company) (the “Rimlinger”) executed a Separation and Settlement Agreement (the “Rimlinger Settlement Agreement”), pursuant to the termination of his service as an officer and director of the Company, in exchange for the issuance of a one year Convertible Redeemable Note (the “Rimlinger Note”) in the principal amount of USD $40,000, at a rate of ten percent (10%) per annum commencing on date of issuance, convertible into shares of the Company’s common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, and other terms and conditions set forth therein.

 

On or about January 10, 2017, the Company and Dr. James G. Ricketts, an individual (the former Chairman of the Board and VP of Investor Relations of the Company) (the “Ricketts”) executed a Separation and Settlement Agreement (the “Ricketts Settlement Agreement”) in which the parties terminated both the Contractor Agreement (“Ricketts Contractor”) dated on or about May 18, 2016, and the Board Member Service Agreement (“Ricketts Board Agreement”) dated on or about May 18, 2016, in exchange for the issuance of a one year Convertible Redeemable Note (the “Ricketts Note”) in the principal amount of USD $40,000, at a rate of ten percent (10%) per annum commencing on date of issuance, convertible into shares of the Company’s common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, and other terms and conditions set forth therein.

 

On January 10, 2017, the Company and Stephen Antol, an individual (the former Chief Financial Officer, Secretary and Treasurer of the Company) (the “Ricketts”) executed a Separation and Settlement Agreement (the “Settlement Agreement”) in which the parties terminated the Contractor Agreement (“Antol Contractor”) dated on or about May 18, 2016, in exchange for the issuance of a one year Convertible Redeemable Note (the “Antol Note”) in the principal amount of USD $40,000, at a rate of ten percent (10%) per annum commencing on date of issuance, convertible into shares of the Company’s common stock at a conversion price equal to the lesser of $0.01 per share or a a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, and other terms and conditions set forth therein.

 

On January 10, 2017, the Company and Brenton Mix, an individual (the newly appointed Chief Executive Officer, President, Chief Financial Officer and Director) (the “Mix”) executed a Board of Directors Services Agreement (the “Mix Services Agreement”), in which the Company agreed to pay to Mix a fee in an amount equal Ten Thousand Dollars (USD $10,000), payable on a quarterly basis, in the form of cash and/or equity, in the form of shares of restricted common stock of the Company, pursuant to the terms and conditions of the Company’s Stock Option Plan effective as of August 27, 2015, and further agreed to provide certain legal protections of Mix from certain liabilities of the Company, existing now or in the future, to the fullest extent permitted by applicable law related to his duties under the Mix Services Agreement, pursuant to the terms of the Indemnification Agreement (the “Mix Indemnification Agreement”), referenced by exhibit therein, executed on even date therewith.

 

On January 10, 2017, the Company and Richard Phillips, an individual (a newly appointed Director) (the “Phillips”) executed a Board of Directors Services Agreement (the “Phillips Services Agreement”), in which the Company agreed to pay to Phillips a fee in an amount equal Ten Thousand Dollars (USD $10,000), payable on a quarterly basis, in the form of cash and/or equity, in the form of shares of restricted common stock of the Company, pursuant to the terms and conditions of the Company’s Stock Option Plan effective as of August 27, 2015, and further agreed to provide certain legal protections of Phillips from certain liabilities of the Company, existing now or in the future, to the fullest extent permitted by applicable law related to his duties under the Phillips Services Agreement, pursuant to the terms of the Indemnification Agreement (the “Phillips Indemnification Agreement”), referenced by exhibit therein, executed on even date therewith.

 

 
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Note Cancellation and Assignment; Transfer of Subsidiary

 

On March 14, 2017, Company executed a note cancellation agreement and assignment with Baker & Myers & Associates LLC which resulted in Elite Data Marketing LLC being assigned and transferred from the Company for Baker Myers, and such entity no longer being a subsidiary of the Company, with no further operational effect or obligation to the Company.

 

Joint Venture Termination Agreement, Note Modification, and Assignment; Transfer of Subsidiary

 

On or about March 14, 2017, the Company and H Y H Investments, S.A. (“HYHI”), a Honduras corporation executed a Joint Venture Termination Agreement (the “JV Termination Agreement”), in which the entire Joint Venture set forth in the original Joint Venture Agreement (the “Joint Venture”), dated May 20, 2016, was rendered null and void, except for the validity and enforceability of a total of Three Million Nine Hundred Thousand Dollars (US$3,900,000) represented by the first eight (8) quarterly payments of the original Amended and Restated Redeemable Note issued on or about May 20, 2016 in the amended principal amount of Four Million Nine Hundred Thousand Dollars (USD $4,900,000), in relation to the following payments: (A) two (2) separate payments of Four Hundred Fifty Thousand Dollars (USD $450,000), plus accrued interest to date, due on July 1, 2016 and October 1, 2016, respectively, for a total of Nine Hundred Thousand Dollars (USD $900,000), and payable in cash or convertible into shares of common stock of DEAC at a conversion price equal to the lesser of $0.01 per share or fifty percent (50%) to the five (5) trading day average closing price immediately preceding the payment date, and (B) the remaining balance of Four Million (USD $4,000,000) payable in cash in a total of eight (8) equal quarterly installments of Five Hundred Thousand Dollars (USD $500,000), plus accrued interest to date, on the first day of each quarter beginning with January 1, 2017 and ending on January 1, 2019, convertible into shares of common stock of DEAC at fifty percent (50%) discount to the five (5) trading day average closing price immediately preceding the payment date, and other terms more fully described in the amended note set forth in the Amended and Restate Redeemable Note, thus cancelling the final two (2) quarterly payments (seventh and eighth quarterly payments) of Five Hundred Thousand Dollars (USD $500,000) each for a reduction of One Million Dollars (UD$1,000,000) of the principal amount of the Amended and Restated Redeemable Note, pursuant to the terms of the Note Cancellation and Extinguishment Agreement (the “Note Cancellation Agreement”), attached as Exhibit A to the JV Termination Agreement, and any and all existing operations, including, but not limited to, all of the assets and liabilities of the Joint Venture remained in Elite Data Holdings S.A., a Honduras corporation (“EDH”), as a wholly-owned subsidiary of Elite Gaming Ventures LLC, a Florida limited liability company (“EGV”), with the ownership interest of EGV assigned and transferred to HYHI and/or its assigns as set forth in the Assignment (the “Assignment”), attached as Exhibit A-1 to the Note Cancellation Agreement, including other terms and conditions set forth therein.

 

The termination of the Joint Venture resulted in Elite Gaming Ventures LLC (and, its wholly-owned subsidiary, Elite Data Holdings S.A.) no longer being a subsidiary of the Company, with no further operational effect or obligation to the Company, except for certain amounts owed by the Company under a further amendment to the Amended and Restated Redeemable Note.

 

Note Cancellation and Extinguishment Agreement

 

On or about March 14, 2017, the Company and Baker & Myers & Associates LLC, a Nevada limited liability company (“Baker Myers,” an entity owned by Sarah Myers, a former Secretary, Treasurer and Director of the Company) executed a Note Cancellation and Extinguishment Agreement (the “Note Cancellation Agreement”), pursuant to which Baker Myers (also herein referred to as “Releasor”) decided to exercise the entire Option Agreement for the acquisition of Elite Data Marketing LLC, a Florida limited liability company (the “EDM”), as set forth in the Share Exchange Agreement, dated May 18, 2016, in which Releasor agreed to forego and waive any and all right in, entitlement to or interest in any principal, interest, late charges, reimbursable attorneys’ fees, reimbursable expenses and any other sums due and payable with respect to a total of Two Hundred Thousand Dollars (US$200,000) of the final two (2) quarterly payments of the Redeemable Note dated May 18, 2016 (the “Cancelled Sum”), and any future payments due under the Cancelled Sum of the Redeemable Note and all or any other of Releasor’s rights under the Cancelled Sum of the Redeemable Note, thereby extinguishing and canceling the Cancelled Sum of the Redeemable Note and terminating any and all of Releasee’s obligations thereunder Cancelled Sum of the Redeemable Note, effective as of March 14, 2017 (the “Effective Date”), in exchange for the assignment and transfer by the Company of any and all of the issued and outstanding membership interests owned and held by Releasee representing a total of One Hundred Percent (100%) of the ownership interest of EDM to Releasor on the Effective Date (the “Cancellation Transaction”), pursuant to the Assignment of Membership Interests (the “Assignment”), attached as Exhibit A to the Note Cancellation Agreement, and including other terms and conditions set forth therein.

 

 
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The Cancellation Transaction and Assignment resulted in Elite Data Marketing LLC, which was created in May of 2016 to hold the assets of www.classifiedride.com originally acquired by the Company from Baker Myers, no longer being a subsidiary of the Company, with no further operational effect or obligation to the Company.

 

Baker Myers Warrant Transfer – Voting Trust

 

On March 14, 2017, Baker Myers executed that certain Voting Trust Agreement, of which the Company approved, in which Baker Myers agreed to the assignment and transfer of the ownership interest of its stock purchase warrant (the “Warrant”) for the right to purchase a total of 3,000,000 shares of Series B Preferred Stock, owned and held by Baker Myers, to the Voting Trustee, which shall, thereafter, upon the completion by the Company of a reverse split of 1:1000 of its Common Stock, be simultaneously exercised and converted by the Company and Voting Trustee into a total of 30,000 of Series B Preferred Stock, and 2,970,000 shares of Common Stock, to be held by the Voting Trustee in the Voting Trust for the benefit of Baker Myers, in accordance with the terms of the Voting Trust Agreement (as described more fully herein).

 

Birch First Warrant Transfer – Voting Trust

 

On March 14, 2017, Birch First Capital Investments LLC (f/k/a Birch First Capital Fund LLC), a Delaware limited liability company (“Birch First Capital”) executed that certain Voting Trust Agreement, of which the Company approved, in which Birch First Capital agreed to the assignment and transfer of the ownership interest of its stock purchase warrant (the “Warrant”) for the right to purchase a total of 4,000,000 shares of Series B Preferred Stock, owned and held by Birch First Capital to the Voting Trustee, which shall, thereafter, upon the completion by the Company of a reverse split of 1:1000 of its Common Stock, be simultaneously exercised and converted by the Company and Voting Trustee into a total of 40,000 shares Series B Preferred Stock, and 3,960,000 shares of Common Stock, to be held by the Voting Trustee in the Voting Trust for the benefit of Birch First Capital, in accordance with the terms of the Voting Trust Agreement (as described more fully herein).

 

Ricketts and Antol Stock Transfer – Voting Trust

 

On or about March 14, 2017, Dr. James G. Ricketts, and Stephen Antol (each a Stockholder) executed a Voting Trust Agreement, which the Company approved in advance, in which each of the Stockholder, jointly and severally, agreed to each deposit with the Voting Trustee a total of 500,000 shares of Series B Preferred Stock (for a total of 1,000,000 shares), owned and held by each of them as Stockholders, as referenced in the execution of two (2) separate assignments, which shall, thereafter, upon the completion by the Company of a reverse split of 1:1000 of its Common Stock, be converted by the Company and Voting Trustee into a total of 5,000 shares of Series B Preferred Stock each (for total of 10,000 shares), and 495,000 shares of Common Stock each (for a total totaling 990,000 shares), to be held by the Voting Trustee in the Voting Trust for the benefit of each such Stockholder, in accordance with the terms of the Voting Trust Agreement (as described more fully herein).

 

 
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Joint Venture Termination Agreement, Note Modification, and Assignment; Transfer of Subsidiary

 

On or about March 14, 2017, the Company and H Y H Investments, S.A. (“HYHI”), a Honduras corporation executed a Joint Venture Termination Agreement (the “JV Termination Agreement”), in which the entire Joint Venture set forth in the original Joint Venture Agreement (the “Joint Venture”), dated May 20, 2016, was rendered null and void, except for the validity and enforceability of a total of Three Million Nine Hundred Thousand Dollars (US$3,900,000) represented by the first eight (8) quarterly payments of the original Amended and Restated Redeemable Note issued on or about May 20, 2016 in the amended principal amount of Four Million Nine Hundred Thousand Dollars (USD $4,900,000), in relation to the following payments: (A) two (2) separate payments of Four Hundred Fifty Thousand Dollars (USD $450,000), plus accrued interest to date, due on July 1, 2016 and October 1, 2016, respectively, for a total of Nine Hundred Thousand Dollars (USD $900,000), and payable in cash or convertible into shares of common stock of DEAC at a conversion price equal to the lesser of $0.01 per share or fifty percent (50%) to the five (5) trading day average closing price immediately preceding the payment date, and (B) the remaining balance of Four Million (USD $4,000,000) payable in cash in a total of eight (8) equal quarterly installments of Five Hundred Thousand Dollars (USD $500,000), plus accrued interest to date, on the first day of each quarter beginning with January 1, 2017 and ending on January 1, 2019, convertible into shares of common stock of DEAC at fifty percent (50%) discount to the five (5) trading day average closing price immediately preceding the payment date, and other terms more fully described in the amended note set forth in the Amended and Restate Redeemable Note, thus cancelling the final two (2) quarterly payments (seventh and eighth quarterly payments) of Five Hundred Thousand Dollars (USD $500,000) each for a reduction of One Million Dollars (UD$1,000,000) of the principal amount of the Amended and Restated Redeemable Note, pursuant to the terms of the Note Cancellation and Extinguishment Agreement (the “Note Cancellation Agreement”), attached as Exhibit A to the JV Termination Agreement, and any and all existing operations, including, but not limited to, all of the assets and liabilities of the Joint Venture remained in Elite Data Holdings S.A., a Honduras corporation (“EDH”), as a wholly-owned subsidiary of Elite Gaming Ventures LLC, a Florida limited liability company (“EGV”), with the ownership interest of EGV assigned and transferred to HYHI and/or its assigns as set forth in the Assignment (the “Assignment”), attached as Exhibit A-1 to the Note Cancellation Agreement, including other terms and conditions set forth therein.

 

The termination of the Joint Venture resulted in Elite Gaming Ventures LLC (and, its wholly-owned subsidiary, Elite Data Holdings S.A.) no longer being a subsidiary of the Company, with no further operational effect or obligation to the Company, except for certain amounts owed by the Company under a further amendment to the Amended and Restated Redeemable Note.

 

Amendment No. 2 to the Definitive Agreement for Purchase of WOD

 

On or about March 14, 2017, the Company and WOD MARKET LLC, a Colorado limited liability company (“WOD”), and WOD Holdings Inc., a Delaware corporation (“WODH”), a newly formed entity, owned and held by Brenton Mix and Taryn Watson, individually (collectively referred to as the “WOD Controlling Member(s)”), executed amendment No.2 to the definitive agreement (the “Amendment No.2”), pursuant to which the parties agreed to the following amended abbreviated terms:

 

1. The definition of Second Closing and Third and Final Closing in the Original Agreement was amended and restated as follows:

 

“Second Closing shall be amended and replaced with the meaning of Subsequent Closings, as described and set forth in Schedule 1.1, as amended.”

 

“Third and Final Closing shall be amended and replaced with the meaning of Subsequent Closings, representing a closing on the Controlling Equity Ownership, as described and set forth in Schedule 1.1, as amended.”

 

 
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2. Section 1.1 of the Original Agreement was amended and restated as follows:

 

“Section 1.1 Acquisition of WOD. Upon the terms and subject to the conditions set forth in this Agreement, DEAC shall acquire, from the WOD Controlling Member(s), a certain percentage of the ownership interest in WOD (the “Equity Ownership”), equal to not less than sixty percent (60%) of the total Equity Ownership (the “Controlling Equity Ownership”), in a series of closings in the form of one or more capital contributions and equity exchanges, upon which WOD shall become a controlled subsidiary of DEAC, after the closing on the Controlling Equity Ownership has occurred, as described and set forth in Schedule 1.1 hereto.”

 

3. Section 1.2 of the Original Agreement was amended and restated as follows:

 

Section 1.2 Agreement to Exchange WOD Units for New DEAC Shares . Pursuant to Section 1.1 hereinabove, (i) WOD shall assign, transfer, convey and deliver the WOD Units to DEAC; and in consideration and exchange therefor, DEAC shall; (ii) issue and deliver the New DEAC Shares into Trust (as hereinafter defined), in such amounts as described and set forth in Schedule 1.2 hereto (collectively referred to as the “ Equity Exchange(s) ”).

 

4. Section 8.2(d) of the Original Agreement was amended and restated as follows:

 

“(d) By either DEAC or WOD, if the closing on the Controlling Equity Ownership shall not have consummated before December 31, 2018; provided, however , that this Agreement may be extended by written notice of either WOD or DEAC if such closing shall not have consummated as a result of WOD or DEAC having failed to receive all required regulatory approvals or consents with respect to this transaction or as the result of the entering of an order as described in this Agreement; and further provided, however , that the right to terminate this Agreement under this Section 8.2(d) shall not be available to any party whose failure to fulfill any obligations under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before this date;”

 

5. The second paragraph of Section 8.3 of the Original Agreement was amended and restated as follows:

 

“Notwithstanding the foregoing, on the date of termination, WOD Controlling Members shall have the right to either (a) request the delivery of the proportional New DEAC Shares represented by the Equity Exchanges, held in Trust (as hereinafter defined), in which DEAC shall retain any and all ownership interest in WOD Units owned and held as of such date, or (b) forfeit any and all proportional New DEAC Shares held in Trust (as hereinafter defined), representing the Equity Exchanges as of such date, and request DEAC to return all WOD Units owned and held as of such date, first Initial Shares for Initial Closing Units, and then, in exchange for a payment from WOD or WOD Controlling Members, at the sole discretion of DEAC, in the form of either (i) a cash payment equal to two times (2x) the amount of the aggregate total of all Additional Capital Contributions (as defined in Schedule 1.1 herein) made by DEAC as of such date, or (ii) a stock payment equal to two and one half times (2.5x) the amount of the aggregate total of all Additional Capital Contributions (as defined in Schedule 1.1 herein) made by DEAC as of such date, to be issued in a parent entity of WOD, if such exists at the time, at a per share price and type of securities mutually determined at such time. Separately, DEAC shall be required to repay any outstanding balance of Interim Financings provided by WOD as set forth in Schedule 1.4(c) herein. Upon the completion of a termination, neither party shall have any further obligations to the other thereafter, except as otherwise provided for herein in this Agreement.”

 

6. Section 1.4(b) of Schedule 1.4 of the Original Agreement was amended and restated as follows:

 

“(b) Books and Records . On or before the next Subsequent Closing after the First Closing as set forth in Schedule 1.1 herein, DEAC shall complete all necessary corporate actions to effect any and all outstanding DEAC corporate matters, including, but not limited to, SEC filing of Form 10K for the period ending December 31, 2015, Form 10Q for period ending March 31, 2016, Form 10Q for period ending June 30, 2016, and other documentation required for DEAC to become a compliant and fully reporting public company (the “ SEC Filing ”), and on or before a Subsequent Closing related to the Second Capital Threshold as set forth in Schedule 1.1 herein, WOD shall complete all necessary corporate actions to effect any and all outstanding WOD corporate matters, including, but not limited to, two years of audit financials for period ending December 31, 2014, December 31, 2015, and December 31, 2016, including any other applicable year-end audit, and interim reviewed financials for period ending the most recent financial quarter in the applicable year, in accordance with US GAAP (the “ Books and Records ”), in form acceptable to DEAC and its auditors. Separately, DEAC must be current with all federal tax return filings for periods ending 2013, 2014, 2015, 2016 and any other applicable year on or before a Subsequent Closing related to the Second Capital Threshold.”

 

 
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7. Schedules 1.1 and 1.2 of the Original Agreement were amended and restated, as more fully described in Exhibit I, attached hereto and incorporated by reference as being a part of the Original Agreement, as amended.

 

8. Schedule 1.4(c) of the Original Agreement, as amended, was amended further to reflect the resignation of Sarah Myers as the Secretary, Treasurer and Director of the Company, and the concurrent new appointment of Richard Phillips as the Secretary and Treasurer, in addition to his current position as a member of the Board of Directors of the Company, effective immediately.

 

9. Schedule 1.4 of the Original Agreement was amended to include the addition of Section 1.4(g) related to new contractor agreements as follows:

 

“(g) New Contractor Agreements . As a condition of the First Closing, as amended, DEAC has agreed to the execution of two (2) new contractor agreements: (A) Brenton Mix, as Chief Executive Officer and Chief Financial Officer of DEAC, in the form attached hereto as Exhibit C, and (B) Richard Phillips, as the Secretary and Treasurer of DEAC, in the form attached hereto as Exhibit D.”

 

Joint Venture Agreement to Exhibit I of Amendment No. 2 to the Definitive Agreement

 

On or about March 14, 2017, the Company WOD Holdings Inc., a Delaware corporation (“WODH”) executed a Joint Venture Agreement (the “Joint Venture Agreement”) pursuant to Exhibit I of the Amendment No. 2 to the Definitive Agreement (the “Amendment No. 2”), whereby the parties agreed to form a Joint Venture (the “Joint Venture”) to further develop and manage the current business of WOD Market LLC, a Colorado limited liability company, as a provider of intelligent retail solutions for gym owners and coaches, including the management of retail sales, up front inventory purchases, ongoing inventory management, payments, marketing, and related services.

 

Under the terms of the Joint Venture, the initial ownership interest of WOD was 20% owned by the Company, with the remaining 80% owned WODH, with the option of Company to provide additional capital contributions to WOD in increments of not less than $10,000 up to a total of $8 million dollars in the aggregate, which included an equity exchange of up to a total of 800 units (80%) of WOD owned initially by WODH to the Company for a total of approximately 199,000 shares of Series B Preferred Stock and approximately 18,801,000 shares of Common Stock of the Company (the “Shares”) to be issued to WODH upon the completion of a final closing on or before December 31, 2018, under the terms set forth in Amendment No. 2.

 

Until a minimum of at least $4 million in additional capital contributions have been made by the Company to WOD, resulting in a controlling ownership interest of not less than 60% of WOD by the Company, all the Shares of Company stock earmarked for the equity exchange with WODH is being held in a Voting Trust (as defined elsewhere in this filing), along with other key shareholder positions, in order to recapitalize the Company post a 1:1000 reverse split (which was previously approved), pending effectiveness after the Company becomes a current and fully-reporting public company.

 

 
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Contractor Agreements to Exhibit C & D of Amendment No. 2 to the Definitive Agreement

 

On or about March 14, 2017, the Company and Brenton Mix, an individual (and, also the Chairman, Chief Executive Officer, President and Chief Financial Officer of the Company) (“Mix”) executed a Contractor Agreement (the “Mix Agreement”) to formalize the engagement Mix (pursuant to his original appointment dated January 10, 2107) for his continued services to the Company and for such other services, as deemed necessary by the Board of Directors, from time to time, for a period of three (3) years from the date of execution, and renewal for two (2) successive one (1) year terms unless terminated early. The Company agreed to compensate Mix in the form of (a) a total of $10,000 per month for the first year, $12,500 per month for the second year, $15,000 per month for the third year, and $20,000 per month for subsequent terms, payable in cash or converted into restricted common stock of the Company, at Mix’s discretion, pursuant to the Company’s Stock Option Plan then in effect, and (b) the right to participate in future stock options then in effect, including other terms and conditions set forth therein.

 

On or about March 14, 2017, the Company and Richard Phillips, an individual (and, also the Secretary, Treasurer and Director of the Company) (“Phillips”) executed a Contractor Agreement (the “Phillips Agreement”) to formalize the engagement Phillips (pursuant to his original appointment dated January 10, 2107 and further appointment on March 14, 2017) for his continued services to the Company and for such other services, as deemed necessary by the Board of Directors, from time to time, for a period of two (2) years from the date of execution, and renewal for three (3) successive one (1) year terms unless terminated early. The Company agreed to compensate Phillips in the form of (a) a total of $1,250 per month for the first six months of the first year, $2,500 per month for the second six months of the first year, $5,000 per month for the second year and for subsequent terms, payable in cash or converted into restricted common stock of the Company, at Phillips’s discretion, pursuant to the Company’s Stock Option Plan then in effect, and (b) the right to participate in future stock options then in effect, including other terms and conditions set forth therein.

 

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On March 14, 2017, the Company accepted the resignation of Sarah Myers as the Secretary and Treasurer of the Company, effective immediately. Concurrently, on March 14, 2017, the Company appointed Richard Phillips as Secretary and Treasurer of the Company, in addition to his current position as a member of the Board of Directors of the Company. There was no disagreement between Ms. Myers and the Company.

 

On August 4, 2017, the Company filed a Pre 14C Information Statement with the U.S. Securities and Exchange Commission. The purpose of this Information Statement is to inform the holders of record, as of the close of business on August 4, 2017 (the “Record Date”), of shares of all series of stock with voting power of Elite Data Services, Inc., a Florida corporation (the “Company,” or the “Corporation”), that our Board of Directors and majority shareholder of approximately 100.00% of our Series B preferred stock , having voting rights equal to 1000:1 and representing approximately 88.00% of total voting rights, as of the Record Date have giving written consent as of August 4, 2017, to approve the following:

 

(a) To change of corporate name from Elite Data Services Inc. to WOD Retail Solutions Inc.

 

(b) To increase the authorized capital stock of the Corporation to 10,500,000,000 shares, of which 10,000,000,000 shares shall be Common stock, par value $0.0001, and 500,000,000 shares shall be preferred stock, par value $0.0001, as set forth on the proposed Amendment to the Amend and Restated Articles of Incorporation, attached hereto as Exhibit A;

 

(c) To pre-approve up to 1 for 10,000 reverse stock split, which shall be effected at the sole discretion of the Board of Directors at any time on or before December 31, 2017, and after the date that is 20 calendar days after the mailing of this Information Statement.

 

 
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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

 

Plan of Operations

 

The Company’s current plan of operations for the twelve months ending December 31, 2016 involves the continued development and growth of its online marketing and gaming businesses and to complete the closings on the WOD transaction.

 

During the year ending December 31, 2015, we made limited progress with our online marketing platforms due to lack of funding to complete required programming and coding enhancements. However, with additional funds, we anticipate the ability of bringing certain new marketing offerings to our platforms in hopes of increasing traffic flow, capturing new users and generating revenues.

 

Separately, pursuant to the terms of the Joint Venture with HYHI, we intend to implement the creation of the joint venture relationship using Elite Data Holdings S.A., a Honduras corporation, a wholly-owned subsidiary of Elite Gaming Ventures LLC, a Florida limited liability company (“EVG”), a wholly-owned subsidiary of the Company, and a distributor license from HYHI and El Mar Muerto Beauty Mineral, S.A., a Honduras corporation (“EMBM”) to establish gaming operations (the “Purpose”) by distributing and maintaining a total of eighty (80) slot machines in the cities of La Lima, Cortes; eighty (80) slot machines in the cities of Trujillo, Colon; and One Hundred and Sixty (160) slot machines in Roatan in the bay island of Honduras.

 

In order to effect the distributor license related to the gaming operations, the Company and EVG is responsible for providing any and all financial and operational resources required to execute on the License granted to the Company, including, but not limited to, the funding for the initial and ongoing operating costs in the minimum amount of Five Hundred Thousand Dollars (USD $500,000) on or before December 31, 2016 (the “Initial Funding”).

 

Separately, the Company intends to expand its operations in the fourth quarter of 2016 to include intelligent retail solutions for gym owners and coaches through the completion of the acquisition of WOD, which the Company currently owns a minority interest stake of 20% as of August 26, 2016, with 100% ownership interest anticipated to be completed on or before October 15, 2016.

 

WOD serves the fitness community by allowing coaches and trainers to focus on what’s important while athletes have access to the products they need to perform at their highest level. WOD aims to relieve gym owners and coaches of the burden of managing retail sales including upfront inventory purchases, ongoing inventory management, payments, marketing, etc. while also providing a service for members to have convenient access to products that help them perform better. WOD intends to forge a mutually beneficial relationship with each gym, customer and vendor to ensure the best possible experience.

 

Our ability to implement the phases of our business plan will be dependent on us obtaining the significant financing for these projects.

 

Requirements and Utilization of Funds

 

To implement our business plan, we will need to continue to raise working capital in an amount of at least $2,000,000 over the twelve month period beginning in the third quarter of 2016 on terms and conditions to be determined. Management may elect to seek subsequent interim or “bridge” financing in the form of debt as may be necessary. 

 

At this time, management is unable to determine the specific amounts and terms of such future financings, or whether or not we will be successful in raising such funds on a basis acceptable to us. 

 

To date, management has not identified the source for such additional capital, and whether the Company will be able to raise sufficient capital, and do so on commercially reasonable terms, is uncertain. If we cannot raise additional proceeds via a private placement of our common stock or secure debt financing, we would be required to cease business operations. As a result, investors in our common stock would lose all of their investment. 

 

 
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Going Concern

 

In their report for our December 31, 2015 Form 10-K, our auditors have issued a “going concern” opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our expenses. This is because we have not generated enough revenues and no substantial revenues are anticipated in the near-term. Accordingly, we must seek to raise working capital from sources other than from the sale of our products through debt and equity financing facilities. 

 

Critical Accounting Policies

 

The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles (“GAAP”) in the United States requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the financial statements and the accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. 

 

We believe that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions. We have identified in Note 3, Summary of Significant Accounting Policies to the Financial Statements contained in Item 1 of this document certain critical accounting policies that affect the more significant judgments and estimates used in the preparation of the financial statements. 

 

RESULTS FROM OPERATIONS 

 

Results for the three months ended September 30, 2016 compared to the three months ended September 30, 2015 

 

Revenues and Net Loss

 

Our operating results for the three months ended September 30, 2016 compared to the three months ended September 30, 2015 are as follows: 

 

 

 

Three Months Ended September 30,

 

 

 

2016 

 

 

2015 

 

Revenues 

 

$ -

 

 

$ -

 

Operating and other expenses 

 

 

11,801,512

 

 

 

515,831

 

Net (Loss) 

 

$ (11,801,512 )

 

$ (515,831 )

 

 
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Operating Expenses and Other Expenses

 

Our operating expenses for the three months ended September 30, 2016 compared to the three months ended September 30, 2015 are as follows: 

 

 

 

Three Months Ended September 30,

 

 

 

2016

 

 

2015

 

Consulting services 

 

$ 70,000

 

 

$ 79,000

 

Management services

 

 

10,000,000

 

 

 

-

 

Investor relation services 

 

 

-

 

 

 

31,822

 

Loss (gain) on extinguishment of debt 

 

 

-

 

 

 

(571 )

Interest Expense 

 

 

170,460

 

 

 

312,889

 

Derivative related expenses

 

 

543,704

 

 

 

-

 

Asset impairment

 

 

480,000

 

 

 

-

 

Amortization of debt discount

 

 

555,574

 

 

 

22,917

 

(Gain) loss on derivative settlement

 

 

3,015

 

 

 

(138,097 )

Forgiveness of debt

 

 

(25,000 )

 

 

-

 

Warrants issued for services 

 

 

-

 

 

 

352,275

 

 

 

 

 

 

 

 

 

 

Non-cash settlement charges

 

 

-

 

 

 

85,842

 

General and administrative expenses 

 

 

3,759

 

 

 

122,029

 

Total Operating and Other Expenses 

 

$ 11,801,512

 

 

$ 515,831

 

 

The increase in derivative and interest related expenses in 2016 from 2015 is primarily due to the notes issued in 2015 reaching maturity and having their embedded derivative terms activated and conversions commenced and interest on new notes from acquisitions plus the change in interest rates from debt settlements, management services increased with the issuance of 2,000,000 shares of Series B Preferred Stock, 100,000 shares of Series B Preferred Stock was issued for 20% membership of WOD Market LLC and immediately impaired for $480,000 for the three months ended September 30, 2016

 

Results for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

 

Our operating results for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015 are as follows: 

 

Revenues and Net Loss

 

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

Revenues 

 

$ -

 

 

$ 1,596

 

Operating and other expenses

 

 

17,534,664

 

 

 

2,443,382

 

Net (Loss)

 

$ (17,534,664 )

 

$ (2,441,786 )

 

 
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Operating Expenses and Other Expenses and (Income) 

 

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

Consulting services 

 

$ 90,000

 

 

$ 138,794

 

 

 

 

 

 

 

 

 

 

Investor relation services 

 

 

3,115

 

 

 

323,260

 

(Gain) loss on extinguishment of debt 

 

 

(1,262,162 )

 

 

958,700

 

Management services

 

 

10,000,000

 

 

 

-

 

Interest Expense 

 

 

559,910

 

 

 

368,356

 

Derivative related expenses

 

 

1,668,698

 

 

 

-

 

Amortization of debt discount

 

 

846,882

 

 

 

22,917

 

 

 

 

 

 

 

 

 

 

Asset impairment

 

 

5,380,000

 

 

 

-

 

(Gain) loss on derivative settlement

 

 

271,033

 

 

 

(138,097 )

Forgiveness of debt

 

 

(59,177 )

 

 

-

 

Non-cash settlement charges

 

 

-

 

 

 

85,842

 

Warrants issued for services 

 

 

-

 

 

 

481,156

 

General and administrative expenses 

 

 

36,365

 

 

 

202,454

 

Total Operating and Other Expenses 

 

$ 17,534,664

 

 

$ 2,443,382

 

 

The decrease in consulting services from 2015 to 2016 is primarily due to the Company having a new non-cash consulting agreement that replaced the prior agreement and will require a charge of $10,000 per month payment. Interest expense increased based on the increase in our debt facilities incurred to fund current operations.

 

The loss on the extinguishment of debt is attributable to the conversion and elimination of the contingent liability of $566,212 in the 2015 period of measurement. The debt was converted at $0.10 per share and the non-cash loss resulted from the difference in the market price of the stock on the date of the conversion for the number of shares converted on that date. In 2016 the settlement and restructuring of certain debt caused the gain.

 

The warrant costs are a result of warrants issued to a consulting firm and amortized over the life of the warrant. The agreement with the firm was cancelled under the terms on the agreement on January 21, 2015 and the warrant was cancelled on April 1, 2015. The remaining prepaid expense was expensed in the 2015 current period of measurement. 

 

The increase in derivative and interest related expenses in 2016 from 2015 is primarily due to the notes issued in 2015 reaching maturity and having their embedded derivative terms activated and conversions commenced and interest on new notes from acquisitions plus the change in interest rates from debt settlements.

 

Management services increased with the issuance of 2,000,000 shares of Series B Preferred Stock, 100,000 shares of Series B Preferred Stock was issued for 20% membership of WOD Market LLC and immediately impaired for $480,000 for the three months ended September 30, 2016. The joint venture was to begin May 20, 2016 and the $4,900,000 asset was impaired because it lacked immediate value.

 

Liquidity and Capital Resources 

 

As of September 30, 2016, and December 31, 2015, the Company had cash on hand of $953 and $1,730, respectively. The Company had decreased cash flow of $777 for nine months ended September 30, 2016 from operations. 

 

The Company expects significant capital expenditures during the next 12 months, contingent upon raising additional capital. We anticipate that we will need $2,000,000 for operations for the next 12 months. This capital will be needed for continued development of the Company’s network strategy and gaming expansion. 

 

 
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The source of such capital is uncertain, and there is no assurance that the Company will be successful in obtaining such capital on commercially reasonable terms, or at all. We have a working capital deficit and will need cash infusions from investors and/or current shareholders to deploy our current business plan. 

 

 

 

September 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

Current assets 

 

$ 120,953

 

 

$ 101,730

 

Current liabilities

 

 

(5,529,184 )

 

 

(1,612,141 )

Working capital deficit 

 

$ (5,408,231 )

 

$ (1,510,411 )

 

Cash Flows 

 

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

Net cash used in operating activities 

 

$ (32,777 )

 

$ (252,269 )

Net cash used in investing activities 

 

 

-

 

 

 

(100,000 )

Net cash provided by financing activities 

 

 

32,000

 

 

 

358,557

 

Net increase (decrease) increase in cash 

 

$ (777 )

 

$ 6,288

 

 

Net cash provided by investing activities for the period ended September 30, 2015 includes the non-refundable deposit tendered for the gaming license. Net cash provided by financing activities in the period ended September 30, 2016 and 2015 is from proceeds of convertible notes. Net cash used in investing activities includes the proceeds of the convertible notes that were used to secure the gaming license, which provides for distribution rights in two cities on the Honduras mainland and Roatan, the largest of the bay islands of Honduras See Note 9 and 11. Net cash provided by operating activities for the period ended September 30, 2015 includes the stock compensation and warrants issued for investor relations services and the loss recorded on the extinguishment of debt pursuant to the contingent consideration payable. See Note 5.

 

Going Concern Uncertainties

 

Management believes that our current financial condition, liquidity and capital resources will not satisfy our cash requirements for the next twelve months to deploy our current business plan, and as such we will need to either raise additional proceeds through financing facilities, sales of securities and our officers and directors will need to make additional financial commitments to our Company, neither of which is guaranteed. We plan to satisfy our future cash requirements, primarily the working capital required to execute on our current business and fund our necessary operating expenses, through financial commitments from future debt facilities and equity sales, if and when possible. 

 

Management believes that we may generate more revenue within the next 12 months, but that these revenues will not satisfy our cash requirements to implement our current business plan, including, but not limited to, project acquisitions, engineering, and integration costs, and other operating expenses and corporate overhead, which is subject to change depending upon pending business opportunities and available financing.

 

We have no committed source for funds as of September 30, 2016. No representation is made that any funds will be available when needed. In the event that funds cannot be raised when needed, we may not be able to carry out our business plan, may never achieve revenue, and could fail to satisfy our future cash requirements as a result of these uncertainties. 

 

 
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It will be necessary to raise working capital funds through equity and debt financing facilities, which are extremely difficult for an early stage company to secure and may not be available to us or on a basis favorable to us. However, if such debt financing is available, we would likely have to pay additional costs associated with high-risk loans and be subject to above market interest rates. 

 

The Company and has accumulated a deficit of $31,702,133 at September 30, 2016. We currently have no working capital with which continue our operating activities. The amount of capital required to sustain operations is subject to future events and uncertainties, but the Company anticipates it will need to obtain approximately $2,000,000 in additional working capital in the form of debt and equity in order to cover our current expenses over the next 12 months and continue to implement our business plan. Whether such capital will be obtainable or obtainable on commercially reasonable terms is at this date uncertain. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. 

 

Capital Expenditures

 

We have not incurred any commitments for material capital expenditures except for the non-refundable payment for the intangible asset license. 

 

Off-Balance Sheet Arrangements

 

During the nine months ended September 30, 2016, we did not engage in any off-balance sheet arrangements set forth in Item 303(a) (4) of Regulation S-K. 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 

 

As a “smaller reporting company” as defined by Rule 229.10(f) (1), we are not required to provide the information required by this Item 3. 

 

ITEM 4. CONTROLS AND PROCEDURES.

 

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management is responsible for establishing and maintaining adequate controls over financial reporting, and bases such evaluations on criteria established in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) updated 2013.

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Act) that are designed to ensure that required information is recorded, processed, summarized and reported within the required time frame, as specified in rules set forth by the Securities and Exchange Commission. Based upon that evaluation and the material weakness described below, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2016.

 

In connection with the preparation of our financial statements for the three months ended September 30, 2016, we did not maintain effective controls over financial statement disclosure. Specifically, we maintain that we did not have formal documented policies and procedures in place to support our fair value measurements of certain equity transactions in a suitable presentation for subsequent and timely review. Accordingly, management determined that this control deficiency constituted a material weakness. As part of fulfilling its responsibility, management is working to establish an accounting and financial reporting process for determining the fair value measurements and disclosures presentable on a quarterly basis that allows for timely decisions in the application and determination of the appropriate accounting treatment pursuant to generally accepted accounting principles.

 

 
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A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 

 

Changes in Internal Control over Financial Reporting

 

In the fiscal quarter ended September 30, 2016, there has been a change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a15(f) and 15d15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company’s internal control over financial reporting includes those policies and procedures that:

 

· pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

 

 

· provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

 

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements

 

 
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PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

Litigation

 

On August 16, 2013, Birch First Capital Fund, LLC and/or Birch First Capital Management, LLC (“Birch First”) filed a complaint against the Company in the 15th Judicial Circuit of Florida (2013 CA 012838) alleging breach of contract under a Line of Credit Agreement (“LOC”) totaling $151,000. Effective July 23, 2015, the Company entered into a Settlement Agreement (the “Agreement”) with Birch First, which provided for an Order of Stipulation to be filed with the Court that will dismiss this action with prejudice, with no liability admitted or deemed to be admitted by any party, concerning any and all claims that have been, or could have been, raised in the outstanding litigation between the parties. Pursuant to the Agreement, the Company issued an Amended and Restated Note in the principal amount of $300,000 bearing 2% interest per annum with conversion features equal to the lesser of $.10 per share or 50% of the three intraday trading average for the twenty day trading period prior to each conversion date to be issued quarterly. The Company also issued a Consulting and Advisory Agreement with Birch First and New Note in the principal amount of $300,000 with 2% interest, which is due quarterly payments. Pursuant to the Agreement, the Company will be in default under the terms of the Agreement if the Company files for bankruptcy or the Company’s Common Stock drop below $.00001 per share or if the Company fails to comply with a condition precedent pursuant to the Agreement. See Note 12.

 

Pursuant to the Order of Stipulation, the parties consented to the jurisdiction of the Court for the purposes of enforcement of the Agreement whereby the Complaint will be dismissed with prejudice. The Order of Stipulation is to be filed with the Court five (5) days upon signing of the Agreement.

 

On November 18, 2013, Birch First Capital brought a lawsuit in the 15th Judicial Circuit of Florida against Mr. Charles Cronin and Dr. Earl Beaver (former officers and directors of the Company), naming the Company as a nominal defendant. A motion to dismiss was filed by the Company concerning this derivative lawsuit. As of the date of this report, derivative lawsuit is still pending as the parties engage in settlement negotiations. At this point in time, any amount or settlement is not determinable. This action is currently pending.

 

Settlement

 

On July 23, 2015, the Company and Birch First Capital Fund LLC (“Birch First Capital”), a Delaware limited liability company and Birch First Advisors LLC, a Delaware limited liability company (“Birch Advisors”), executed a Settlement and Stipulation Agreement (the “Settlement Agreement”) dated July 21, 2015, pursuant to which the parties dismissed, with no liability admitted or deemed to be admitted by any party, any and all claims that have been, or could have been, raised in the outstanding litigation between the parties (the “Litigation”).

 

ITEM 1A. RISK FACTORS. 

 

Smaller reporting companies are not required to provide disclosure pursuant to this Item. 

 

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

 

Subsequent to our year ended December 31, 2015, and to the date of filing of this Report, the Company issued the following additional shares of common stock in connection with the convertible notes for the nine months ended September 30, 2016:

 

The Company issued 11,923,377 shares of common stock to JSJ in satisfaction of principal reductions aggregating $6,273;

 

The Company issued 16,942,364 shares of common stock to LG in satisfaction of principal and accrued interest reductions aggregating $7,541;

 

The Company issued 38,880,955 shares of common stock to Adar Bays in satisfaction of principal reductions aggregating $32,713; and

 

The Company issued 41,049,837 shares of common stock to EMA in satisfaction of principal reductions aggregating $14,944.

 

Formation of Voting Trust and Certain Transfer of Securities into Trust

 

Pursuant to the Amendment No. 2, the Joint Venture Agreement and/or the Voting Trust Agreement, as applicable, all dated March 14, 2017, the Company agreed to issue into Trust, pursuant to the terms of the Voting Trust Agreement, (i) a total of 199,000 shares of Series B Preferred Stock, and 19,801,000 shares of Common Stock, respectively, after the completion by the Company of a reverse split of 1:1000 of its Common Stock of the Company, for the benefit of WOD Holdings Inc., (ii) a total of 5,000 shares of Series B Preferred Stock each (for total of 10,000 shares), and 495,000 shares of Common Stock each (for a total totaling 990,000 shares), to be held by the Voting Trustee in the Voting Trust for the benefit of each Dr. James G. Ricketts, and Stephen Antol, converted from the original total of 500,000 shares of Series B Preferred Stock (for a total of 1,000,000 shares), owned and held by each of them as Stockholders, upon the completion by the Company of a reverse split of 1:1000 of its Common Stock, pursuant to mutually agreed to approval in advance set forth in the Voting Trust Agreement, and (iii) a total of 40,000 shares and 30,000 of Series B Preferred Stock each (for total of 70,000 shares), and 3,960,000 shares and 2,970,000 shares of Common Stock, respectively (for a total totaling 6,930,000 shares), to be held by the Voting Trustee in the Voting Trust for the benefit of each Birch First Capital Investments LLC (f/k/a Birch First Capital Fund LLC), a Delaware limited liability company, and Baker & Myers & Associates, LLC, a Nevada limited lability company, respectively, simultaneously exercised and converted by Voting Trustee from the original two (2) separate stock purchase warrants (each a “Warrant” and collectively the “Warrants”) for the right to purchase a total of 4,000,000 and 3,000,000 shares of Series B Preferred Stock, respectively, owned and held by each such Stockholder, respectively (totaling 7,000,000 shares), upon the completion by the Company of a reverse split of 1:1000 of its Common Stock, pursuant to mutually agreed to approval in advance set forth in the Voting Trust Agreement.

 

Unless otherwise stated, we claim an exemption from registration for the issuances and grant described above pursuant to Section 4(2) and/or Rule 506 of Regulation D of the Securities Act, since the foregoing issuances and grant did not involve a public offering, the recipients were accredited investors, and the recipients acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any general solicitation by us or our representatives. No underwriters or agents were involved in the foregoing issuances and grant and we paid no underwriting discounts or commissions. The disclosures concerning the private placement memorandum contained in this report does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company, and is made only as required under applicable rules for filing current reports with the SEC, and as permitted under Rule 135c of the Securities Act of 1933.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

 

None.

 

ITEM 5. OTHER INFORMATION. 

 

None. 

 

 
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ITEM 6. EXHIBITS

 

Those exhibits marked with an asterisk (*) refer to exhibits filed herewith. The other exhibits are incorporated herein by reference, as indicated in the following list.

 

Exhibit Number

 

Description of Exhibit

3.2

 

Amended Note dated July 22, 2016 by and between Elite Data Services, Inc. and POM (incorporated by reference to the Company’s 8-K filed on July 28, 2016)

3.7

 

Amended and Restated Articles of Incorporation (incorporated by reference to the Company’s 8-K filed November 11, 2015 as Exhibit A of the Company’s Definitive 14C filed on September 23, 2015)

3.8

 

Amended and Restated Bylaws (incorporated by reference to the Company’s 8-K filed November 11, 2015 as Exhibit B of the Company’s Definitive 14C filed on September 23, 2015)

3.9

 

2015 Equity Incentive Plan (incorporated by reference to the Company’s 8-K filed November 11, 2015 as Exhibit C of the Company’s Definitive 14C filed on September 23, 2015)

3.10

 

Material Modification to Rights of Securities Holders in the form of a 1;1000 reverse split of the common stock of Elite Data Services Inc. (incorporated by reference to the Company’s 8-K filed August 29, 2016)

4.01

 

Resignation of Anton & Chia, LLP (“A&C”) as the Company’s independent registered accountant (incorporated by reference to the Company’s 8-K filed on January 23, 2017)

4.01

 

Engagement of D’Arelli Pruzansky, P.A. (“DP”) to serve as the Company’s independent registered accountant (incorporated by reference to the Company’s 8-K filed on January 31, 2017).

10.01 

 

Asset Purchase Agreement between Elite Data Services, Inc. and Baker Myers & Associates, LLC dated January 13, 2014. (incorporated by reference to the Company’s 8-K dated January 13, 2014)

10.02

 

Asset Purchase Agreement between Elite Data Services, Inc. and Baker Myers & Associates, LLC dated January 15, 2014 (incorporated by reference to the Company’s 8-K dated January 15, 2014)

10.28

 

Line of Credit with Sarah Myers (incorporated by reference to the Company’s Form 10-K, dated May 12, 2014)

10.30

 

Amendment to Asset Purchase Agreement between Elite Data Services, Inc. and Baker Myers & Associates, LLC dated January 13, 2014 (incorporated by reference to the Company’s 8-K filed January 17, 2014)

10.31

 

Restated Convertible Promissory Note between Elite Data Services, Inc. and Baker Myers & Associates, LLC dated January 13, 2014 (incorporated by reference to the Company’s 8-K filed January 17, 2014)

10.33

 

Promissory Note in the principal amount of $13,500 between Elite Data Services, Inc. and Steven Frye dated April 15, 2014 (incorporated by reference to the Company’s 10-Q for the period ended September 30, 2014)

10.36

 

Investor Relations Consulting Agreement between Elite Data Services, Inc. and Erastar, Inc. (incorporated by reference to the Company’s 8-K dated December 11, 2014)

10.37

 

Elite Data Services, Inc. Warrant Agreement to issue 1,000,000 shares of Common Stock in the name of Erastar, Inc. (incorporated by reference to the Company’s 8-K filed December 11, 2014)

10.38

 

Note Purchase Agreement between Elite Data Services, Inc. and Iconic Holdings, LLC dated March 16, 2015 (incorporated by reference to the Company’s 10-K for the period ended December 31, 2014, file April 15, 2015)

10.39

 

Convertible Promissory Note between Elite Data Services, Inc. and Iconic Holdings, LLC dated March 16, 2015 (incorporated by reference to the Company’s 10-K for the period ended December 31, 2014, filed April 15, 2015)

 

 
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10.40

 

Convertible Promissory Note between Elite Data Services, Inc. and Iconic Holdings, LLC dated March 16, 2015 (incorporated by reference to the Company’s 10-K for the period ended December 31, 2014, filed April 15, 2015)

10.41

 

Addendum #1 to the Promissory Note between Elite Data Services, Inc. and Steven Frye dated April 15, 2014 (incorporated by reference to the Company’s 10-K for the period ended December 31, 2014, filed April 15, 2015)

10.42

 

Securities Purchase Agreement between Elite Data Services, Inc. and H y H Investments, S.A. dated April 4, 2015 (incorporated by reference to the Company’s 8-K dated April 9, 2015)

10.43

 

Promissory Note between Elite Data Services, Inc. and H y H Investments (incorporated by reference to the Company’s 8-K dated April 9, 2015)

10.44

 

Addendum #5 to the Revolving Line of Credit Agreement between Elite Data Services, Inc. and Sarah Myers dated March 31, 2015 (incorporated by reference to the Company’s 10-Q for the period ended March 31, 2015)

10.45

 

12% Convertible Note between Elite Data Services, Inc. and JSJ Investments, Inc. dated June 11, 2015 (incorporated by reference to the Company’s 8-K dated June 15, 2015)

10.46

 

6% Convertible Redeemable Note dated June 11, 2015 between Elite Data Services, Inc. and LG Capital Funding, LLC (incorporated by reference to the Company’s 8-K dated June 15, 2015)

10.47

 

Securities Purchase Agreement dated June 11, 2015 between Elite Data Services, Inc. and LG Capital Funding, LLC (incorporated by reference to the Company’s 8-K dated June 15, 2015)

10.48

 

6% Convertible Redeemable Note dated June 16, 2015 between Elite Data Services, Inc. and LG Capital Funding, LLC (incorporated by reference to the Company’s 8-K/A dated July 6, 2015)

10.49

 

Securities Purchase Agreement dated June 16, 2015 between Elite Data Services, Inc. and LG Capital Funding, LLC (incorporated by reference to the Company’s 8-K/A dated July 6, 2015)

10.50

 

6% Convertible Redeemable Note dated June 16, 2015 between Elite Data Services, Inc. and Adar Bays, LLC (incorporated by reference to the Company’s 8-K/A dated July 6, 2015)

10.51

 

Securities Purchase Agreement dated June 16, 2015 between Elite Data Services, Inc. and Adar Bays, LLC (incorporated by reference to the Company’s 8-K/A dated July 6, 2015

10.52

 

Equity Purchase Agreement between Elite Data Services, Inc. and Tarpon Bay Partners, LLC dated July 14, 2015 (incorporated by reference to the Company’s 8-K dated July 20, 2015)

10.53

 

Registration Rights Agreement between Elite Data Services, Inc. and Tarpon Bay Partners, LLC dated July 14, 2015 (incorporated by reference to the Company’s 8-K dated July 20, 2015)

10.54

 

$50,000 Promissory Note between Elite Data Services, Inc. and Tarpon Bay Partners, LLC dated July 14, 2015 (incorporated by reference to the Company’s 10-Q for period ended June 30, 2015)

10.55

 

12% Convertible Note between Elite Data Services, Inc. and EMA Financial, LLC dated July 14, 2015 (incorporated by reference to the Company’s 8-K dated July 20, 2015)

10.56

 

Securities Purchase Agreement between Elite Data Services, Inc. and EMA Financial, LLC dated July 14, 2015 (incorporated by reference to the Company’s 8-K dated July 20, 2015)

10.57

 

Settlement and Stipulation Agreement dated July 21, 2015 by and between Elite Data Services, Inc. and Birch First Capital Fund, LLC and Birch First Advisors, LLC (incorporated by reference to the Company’s 8-K dated July 27, 2015)

10.58

 

Amended and Restated Note dated July 21, 2015 by and between Elite Data Services, Inc. and Birch First Capital Fund, LLC (incorporated by reference to the Company’s 8-K dated July 27, 2015)

10.59

 

Consulting and Advisory Agreement and New Note dated July 21, 2015 by and between Elite Data Services, Inc. and Birch First Advisors, LLC (incorporated by reference to the Company’s 8-K dated July 27, 2015)

10.61

 

Separation and Settlement Agreement with Complete Release of all Claims dated June 15, 2015 between Elite Data Services, Inc. and Steven Frye (incorporated by reference as Exhibit 10.52 to the Registrant’s 8-K/A filed July 6, 2015)

 

 
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10.62

 

Addendum 2 to the Promissory Note dated June 15, 2015 between Elite Data Services, Inc. and Steven Frye (incorporated by reference as Exhibit 10.53 to the Company’s 8-K/A filed July 6, 2015)

10.63

 

Amended Securities Purchase Agreement between Elite Data Services, Inc. and H y H Investments, S.A. dated September 30, 2015 (incorporated by reference to the Company’s 10-Q for the quarter ended June 30, 2015 filed on August 19, 2015)

10.64

 

Amended Promissory Note between Elite Data Services, Inc. and H y H Investments, S.A. dated September 30, 2015 (incorporated by reference to the Company’s 10-Q for the quarter ended June 30, 2015 filed on August 19, 2015)

10.65

 

Amended Securities Purchase Agreement between Elite Data Services, Inc. and H y H Investments, S.A. dated September 30, 2015 (incorporated by reference to the Company’s 10-Q for the period ended September 30, 2015 filed November 23, 2015)

10.66

 

Strategic Vendor Placement Agreement by and between the Company and Lands End Resort dated May 15, 2015 (incorporated by reference to the Company’s 10-Q for the period ended September 30, 2015 filed November 23, 2015)

10.67

 

Consulting Contract between Elite Data Services, Inc. and Darryl Gomillion dated July 7, 2015 (incorporated by reference to the Company’s 10-Q for the period ended September 30, 2015 filed November 23, 2015)

10.68

 

Second Amendment to Securities Purchase Agreement between Elite Data Services, Inc. and H y H Investments dated November 20, 2015 (incorporated by reference to the Company’s 10-Q for the period ended September 30, 2015 filed November 23, 2015)

10.69

 

Note and Share Cancellation and Exchange Agreement dated May 18, 2016 by and between Elite Data Services, Inc. and Baker Myers & Associates, LLC, including the Option Agreement and Warrant Agreement referenced by exhibits therein (incorporated by reference to the Company’s 8-K filed May 24, 2016)

10.70

 

Sixth Amendment to the Line of Credit Agreement dated May 18, 2016 by and between Elite Data Services, Inc. and Sarah Myers, including the Amended and Restated Note referenced by exhibits therein (incorporated by reference to the Company’s 8-K filed May 24, 2016)

10.71

 

First Amendment Agreement dated May 18, 2016 by and between Elite Data Services, Inc. and Birch First Capital Fund LLC and Birch First Advisors LLC, including the Amended and Restated Redeemable Note No. 1, Warrant No. 1, Amended and Restated Redeemable Note No. 2, Warrant No. 2, and Note Assignment referenced by exhibits therein (incorporated by reference to the Company’s 8-K filed May 24, 2016).

10.72

 

Independent Contractor Agreement dated May 18, 2016 by and between Elite Data Services, Inc. and Dr. James G. Ricketts, including the Subscription Agreement, Services Agreement and Indemnification Agreement referenced by exhibits therein (incorporated by reference to the Company’s 8-K filed May 24, 2016)

10.73

 

Independent Contractor Agreement dated May 18, 2016 by and between Elite Data Services, Inc. and Stephen Antol, including the Subscription Agreement, and Indemnification Agreement referenced by exhibits therein (incorporated by reference to the Company’s 8-K filed May 24, 2016)

10.74

 

Settlement Letter dated May 18, 2016 by and between Elite Data Services, Inc. and JMS Law Group PLLC, including the Convertible Redeemable Note referenced by exhibits therein (incorporated by reference to the Company’s 8-K filed May 24, 2016)

10.75

 

Third Amendment to the Securities Purchase Agreement dated May 20, 2016 by and between Elite Data Services, Inc. and H Y H Investments, S.A., including the Joint Venture Agreement, and Amended and Restated Redeemable Note referenced by exhibits therein (incorporated by reference to the Company’s 8-K filed May 24, 2016)

10.76

 

Assignment of Ownership Interest dated May 20, 2016 by and between Elite Data Services, Inc. and Elite Data Marketing LLC (incorporated by reference to the Company’s 8-K filed May 24, 2016)

10.77

 

Definitive Agreement dated May 20, 2016 by and between Elite Data Services, Inc. and Properties of Merit Inc., including the Convertible Redeemable Note referenced by exhibits therein (incorporated by reference to the Company’s 8-K filed May 24, 2016)

10.78

 

Termination Agreement dated May 20, 2016 by and between Elite Data Services, Inc. and Tarpon Bay Partners LLC, including the Amended Tarpon Note referenced by exhibits therein (incorporated by reference to the Company’s 8-K filed May 24, 2016)

10.79

 

Certificate of Designation of Series B Convertible Preferred Stock dated May 17, 2016 filed with the Secretary of State of the State of Florida (incorporated by reference to the Company’s 8-K filed May 24, 2016)

     

 
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10.80

 

Articles of Organization of Elite Gaming Ventures, LLC dated May 16, 2016 filed with the Secretary of State of the State of Florida, including the Operating Agreement referenced by exhibit therein (incorporated by reference to the Company’s 8-K filed May 24, 2016)

10.81

 

Articles of Organization of Elite Data Marketing, LLC dated May 16, 2016 filed with the Secretary of State of the State of Florida, including the Operating Agreement referenced by exhibit therein (incorporated by reference to the Company’s 8-K filed May 24, 2016)

10.82

 

Termination Agreement and Amended Note dated July 22, 2016 by and between Elite Data Services, Inc. and Properties of Merit Inc. (incorporated by reference to the Company’s 8-K filed July 28, 2016)

10.83

 

Letter of Intent dated July 22, 2016 by and between Elite Data Services, Inc. and WOD Market LLC (incorporated by reference to the Company’s 8-K filed July 28, 2016)

10.84

 

Definitive Agreement dated August 26, 2016 by and between Elite Data Services, Inc. and WOD Market LLC (incorporated by reference to the Company’s 8-K filed September 2, 2016).

10.85

 

Separation and Settlement Agreement and Convertible Redeemable Note dated January 10, 2017 by and between Elite Data Services, Inc. and Charles Rimlinger (incorporated by reference to the Company’s 8-K dated January 12, 2017).

10.86

 

Separation and Settlement Agreement and Convertible Redeemable Note dated January 10, 2017 by and between Elite Data Services, Inc. and Dr. James G. Ricketts (incorporated by reference to the Company’s 8-K dated January 12, 2017).

10.87

 

Separation and Settlement Agreement and Convertible Redeemable Note dated January 10, 2017 by and between Elite Data Services, Inc. and Stephen Antol (incorporated by reference to the Company’s 8-K dated January 12, 2017).

10.88

 

Board Member Services Agreement dated January 10, 2017 by and between Elite Data Services, Inc. and Brenton Mix (incorporated by reference to the Company’s 8-K dated January 12, 2017).

10.89

 

Board Member Services Agreement dated January 10, 2017 by and between Elite Data Services, Inc. and Richard Phillips (incorporated by reference to the Company’s 8-K dated January 12, 2017).

10.90

 

Amendment No. 1 to the Definitive Agreement dated January 10, 2017 by and between Elite Data Services, Inc. and WOD Market LLC (incorporated by reference to the Company’s 8-K dated January 12, 2017).

10.91

 

Note Cancellation and Extinguishment Agreement dated March 14, 2017 by and between Elite Data Services, Inc. and Baker & Myers & Associates LLC. (incorporated by reference to the Company’s 8-K dated March 20, 2017)

10.93

 

Amendment No. 2 to the Definitive Agreement dated March 14, 2017 by and between Elite Data Services, Inc. and WOD Market LLC and WOD Holdings Inc. (incorporated by reference to the Company’s 8-K dated March 20, 2017).

10.94

 

Joint Venture Agreement dated March 14, 2017 by and between Elite Data Services, Inc., and WOD Holdings Inc. (incorporated by reference to the Company’s 8-K dated March 20, 2017).

10.95

 

Contractor Agreement dated March 14, 2017 by and between Elite Data Services, Inc. and Brenton Mix (incorporated by reference to the Company’s 8-K dated March 20, 2017).

10.96

 

Contractor Agreement dated March 14, 2017 by and between Elite Data Services, Inc. and Richard Phillips (incorporated by reference to the Company’s 8-K dated March 20, 2017).

10.97

 

Voting Trust Agreement dated March 14, 2017 by and between Elite Data Services, Inc. and WOD Holdings Inc., Dr. James G. Ricketts, individually, Stephen Antol, individually, Birch First Capital Investments LLC f/k/a Birch First Capital Fund LLC, and Baker & Myers & Associates LLC, and Eilers Law Group, PA (incorporated by reference to the Company’s 8-K dated March 20, 2017).

21.1 

 

List of Subsidiaries

101*** 

 

Interactive Data File (Form 10-Q for the quarterly period ended June 30, 2015 furnished in XBRL).

31.1** 

 

Certification of the registrant’s Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1** 

 

Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

____________

** In accordance with SEC Release 33-8238, Exhibits 31.1 and 32.1 are being furnished and not filed.

*** In accordance with Rule 406T of Regulation S-T, this information is deemed not ”filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. 

 

 
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SIGNATURES

 

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

 

 

ELITE DATA SERVICES, INC. 

Date: November 2, 2017

By: 

/s/ Brenton Mix

Brenton Mix

Chief Executive Officer, Chief Financial Officer and Director

 

 

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