Attached files
| file | filename |
|---|---|
| EX-32 - CANNA Corp | ex32_1.htm |
| EX-31 - CANNA Corp | ex31_1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_________________
FORM 10-Q
_________________
(Mark One)
| [X] | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2018
| [_] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from __________ to ___________
Commission file number: 333-199452
MINING POWER GROUP, INC.
(Exact name of registrant as specified in its charter)
| Colorado | 46-3289369 | |
| (State of Incorporation) | (IRS Employer ID Number) |
20200 Dixie Highway, Suite 906, Miami, FL 33180
(Address of principal executive offices)
(800) 304-2657
(Registrant's Telephone number)
18851 NE 29th Avenue, Suite 700, Aventura, FL 33180
(Former Address and phone of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.
| Yes | [x] | No | [ ] |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 for 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 | [ ] |
Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | [ ] | Accelerated filer | [ ] | |||
| Non-accelerated filer | [ ] | Smaller reporting company | [X] | |||
| (Do not check if a smaller reporting company) | ||||||
| Emerging growth company | [X] | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes | [_] | No | [x] |
Indicate the number of share outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
As of August 17, 2018, there were 55,422,377 shares of the registrant’s common stock issued and outstanding.
| PART 1 – FINANCIAL INFORMATION | Page | |
| Item 1. | Financial Statements (Unaudited) | 4 |
| Condensed Consolidated Balance Sheets –December 31, 2017 and June 30, 2018 | 5 | |
| Condensed Consolidated Statements of Operations - Six months ended June 30, 2018 and 2017 | 6 | |
| Condensed Consolidated Statements of Cash Flows – Six months ended June 30, 2018 and 2017 | 7 | |
| Notes to the Condensed Consolidated Financial Statements | 8 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk – Not Applicable | 18 |
| Item 4. | Controls and Procedures | 18 |
| PART II- OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 18 |
| Item 1A. | Risk Factors- Not Applicable | 18 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 18 |
| Item 3. | Defaults Upon Senior Securities – Not Applicable | 19 |
| Item 4. | Mine Safety Disclosure – Not Applicable | 19 |
| Item 5. | Other Information | 19 |
| Item 6. | Exhibits | 20 |
| Signatures | 20 |
| 3 |
PART I – FINANCIAL INFORMATION
| 4 |
See accompanying notes to the condensed unaudited financial statements.
| 5 |
See accompanying notes to the condensed unaudited financial statements.
| 6 |
See accompanying notes to the condensed unaudited financial statements.
| 7 |
Notes to the Condensed Consolidated Financial Statements
June 30, 2018 (Unaudited)
NOTE l: NATURE OF ORGANIZATION
Mining Power Group, Inc. formerly known as Rich Cigars, Inc. (the "Company") was a Florida Corporation incorporated on July 29, 2013, and was established to manufacture and distribute high-quality, hand rolled, premium cigars under the Rich Cigars brand name. The Company had branded custom cigars to be sold via the internet and through retail locations. The Company's primary operations are currently in the Miami, Florida area, and management intends to conduct our business principally in the U.S. through our own sales and marketing team.
In November 2017, the Company underwent a change in control and became a Colorado corporation. As a result of this change, the Company changed the business name to Intercontinental Technology, Inc. in order to reflect a change in the Company's direction and overall strategy. The Company's new strategic direction will be to focus on the acquisition, development, and marketing of proprietary patented products that are readily marketable internationally, and at the same time, its entering the business of cryptocurrency mining by the ownership of multiple cryptocurrency mining machines.
On December 26, 2017, the Company completed a reorganization. Rich Cigars, Inc., having been renamed to RCGR SUB, Inc., became a direct, wholly-owned subsidiary of a newly formed Delaware corporation, First Intercontinental Technology, Inc. First Intercontinental Technology, Inc. was then considered the parent and is now the public entity. Additionally, another Delaware corporate was formed, Intercontinental Services, Inc. As of the effective time of the merger, all outstanding shares of common stock and preferred stock of Rich Cigars, Inc. were automatically converted into identical shares of common stock or preferred stock in the parent on a one-for-one basis.
On February 16, 2018, the Company's Board of Directors voted to annul and vitiate the series of transactions in Delaware by filing certificates of correction with Delaware's Secretary of State. On February 21, 2018, the Company amended and restated the Articles of incorporation in order to change the Company's name to Mining Power Group, Inc.
NOTE 2: MARCH 2018 Q1 10Q RESTATEMENT
On February 16, 2018, the Company issued 2,000,000 shares of common stock valued at the conversion price of $0.01963. The shares were issued in exchange for $39,250 for a certain Convertible Promissory Note, dated March 27, 2017 between Rich Cigars, Inc and Crown Bridge Partners, LLC which sold the note to D&D Capital, Inc, who submitted the Conversion Notice. On April 16, 2018, D&D Capital, Inc. cancelled the share issuance and returned the 2,000,000 shares. As a result of the cancellation, the Company will file an amendment of its 10-Q filed for the period ended March 31, 2018 to reflect the cancellation.
NOTE 3: GOING CONCERN
These condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the foreseeable future. As of June 30, 2018, the Company has incurred an accumulated deficit of $ 1,426,611 since inception. This raises substantial doubt about the Company's ability to continue as a going concern.
Management's plans include raising capital through the equity markets to fund operations and eventually generating of revenue through its business; however, there can be no assurance that the Company will be successful in such activities. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classifications of the liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4: DISCONTINUED OPERATIONS
On November 27, 2017, the Company entered into a Subscription Agreement for the purchase of 1,000,000 shares of restricted Series A Convertible Preferred Supermajority voting stock Pursuant to this agreement, the Company announced a shift in the strategic focus.
As a result of this shift, the Company has recognized a cessation of it business operations for Rich Cigars in accordance with Accounting Standards Codification (ASC) 205-20, Discontinued Operations. As such, the historical results of the Company have been classified as discontinued operations. As of the year ended December 31, 2017, assets of discontinued operations consisted of property and equipment of $498. As of the period ended June 30, 2018 all property and equipment was written-off.
| 8 |
Results of the discontinued operations for the six months ended June 30, 2018 and 2017 are as follows:
| Three Months Ended June 30 2018 | Three Months Ended June 30 2017 | Six Months Ended June 30 2018 | Six Months Ended June 30 2017 | |||||||||||||
| REVENUES | $ | — | $ | 2,109 | $ | — | $ | 4,606 | ||||||||
| COST OF SALES | — | 731 | — | 2,382 | ||||||||||||
| GROSS PROFIT | — | 1,378 | — | 2,224 | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Accounting and Audit | — | — | — | 6,704 | ||||||||||||
| Amortization Expense | — | 425 | — | 850 | ||||||||||||
| Depreciation Expenses | — | 107 | — | 214 | ||||||||||||
| Legal Fees | — | 3,390 | — | 23,670 | ||||||||||||
| Marketing Expense | — | 30,333 | 32,095 | |||||||||||||
| Meal and Entertainment | — | 5,751 | — | 10,544 | ||||||||||||
| Officers Compensation | — | 48,183 | — | 73,648 | ||||||||||||
| Other General and Administrative | — | 20,347 | — | 25,249 | ||||||||||||
| Professional Fees | — | 19,051 | — | 47,963 | ||||||||||||
| Transfer Agent Fees | — | 1,381 | — | 3,051 | ||||||||||||
| Travel Expense | — | 26,473 | — | 45,836 | ||||||||||||
| Total operating income (expenses) | — | 155,441 | — | 269,824 | ||||||||||||
| Income (loss) from operations | $ | — | $ | (154,063 | ) | $ | — | $ | (267,600 | ) | ||||||
Cash from discontinued operations for the six months ended June 30, 2018 and 2017 are as follows:
Six Months Ended June 30 2018 | Six Months Ended June 30 2017 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Income (loss) from operations | $ | — | $ | (267,600 | ) | |||
| Adjustments to reconcile net loss to net cash | ||||||||
| Depreciation and Amortization | — | 1,064 | ||||||
| Stock issued for services | — | 10,000 | ||||||
| Change in assets and liabilities: | ||||||||
| Accounts receivable | — | — | ||||||
| Prepaid expenses | — | (17,152 | ) | |||||
| Inventory | — | 13,179 | ||||||
| Accounts payable and accrued expenses | — | 19,586 | ||||||
| Net cash used in operating activities | $ | — | $ | (240,923 | ) | |||
NOTE 5: SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
Principles of Consolidation
The accompanying consolidated financial statements of Mining Power Group, Inc. (formerly Rich Cigars, Inc.) includes its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Accounting policies refer to specific accounting principles and the methods of applying those principles to fairly present the company's financial position and results of operations in accordance with generally accepted accounting principles. The policies discussed below include those that management has determined to be the most appropriate in preparing the company's financial statements and are not discussed in a separate footnote.
| 9 |
Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations. This change in classification does not materially affect previously reported cash flows from operations or from financing activities in the Statement of Cash Flows and had no effect on the previously reported Statement of Operations for any period.
Basis of Presentation
The accompanying financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2018 and 2017 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. The Company suggests these condensed financial statements be read in conjunction with the December 31, 2017 audited financial statements and notes thereto included in the Company’s Form 10-K. The results of operations for the period ended June 30, 2018 are not necessarily indicative of the operating results for the full year.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements,
Cash and Cash Equivalents
The Company considers all investments with a maturity date of three months or less when purchased to be cash equivalents. The Company had cash in the amount of $453 and $0 as June 30, 2018 and December 31, 2017 respectively.
Beneficial Conversion Feature
If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature ("BCF"). A BCF is recorded by the Company as a debt discount pursuant to Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion features.
Derivative Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model in assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black Scholes option-pricing model.
Revenue Recognition
The Company recognizes revenue on arrangements in accordance with ASC 606 Revenue Recognition.
| 10 |
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Additionally, the recognition of future tax benefits, such as net operating loss carryforwards, is required to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are determined using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.
In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company's assets and liabilities result in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some or all of the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies.
The Company files income tax returns in the United States and Florida, which are subject to examination by the tax authorities in these jurisdictions. Generally, the statute of limitations related to the Company's federal and state income tax return is three years. The state impact of any federal changes for prior years remains subject to examination for a period up to five years after formal notification to the states.
Management has evaluated tax positions in accordance with ASC 740, Income Taxes, and has not identified any significant tax positions, other than those disclosed. All of the Company's tax years since inception remain subject to examination by Federal and State jurisdictions.
Earnings Per Share
Basic net income per common share (“Basic EPS”) excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue shares of common stock were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net income per common share.
The following table presents the components of the computation of basic and diluted earnings per share for the periods indicated:
| Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Numerator | ||||||||||||||||
| Net income (loss) applicable to common shareholders | $ | (263,637 | ) | $ | (51,267 | ) | $ | 3,796,348 | $ | (349,477 | ) | |||||
| Denominator | ||||||||||||||||
| Weighted average common shares outstanding, basic | 42,787,728 | 2,712,980 | 33,852,073 | 2,688,865 | ||||||||||||
| Convertible preferred stock | — | — | 963,000,000 | — | ||||||||||||
| Convertible promissory notes | — | — | 1,519,812 | — | ||||||||||||
| Weighted average common shares outstanding, diluted | 42,787,728 | 2,712,980 | 998,371,885 | 2,688,865 | ||||||||||||
| Net Income per share - Basic | $ | (0.01 | ) | $ | (0.02 | ) | $ | 0.11 | $ | (0.13 | ) | |||||
| Net income per shares - Diluted | $ | (0.01 | ) | $ | (0.02 | ) | $ | 0.00 | $ | (0.13 | ) | |||||
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NOTE 6: CONVERTIBLE NOTES PAYABLE
1 - On March 27, 2017, the Company entered into a potentially dilutive convertible advance with Crown Bridge Partners LLC. The agreement provides that the Company may borrow up to $675,000. Borrowings under the line bear interest at 8% upon maturity and include a 10% issue discount. The maturity date for each tranche funded shall be 12 months from the effective date of each tranche. As of December 31, 2017, the Company has drawn a $75,000 credit line against this facility. The advance, was payable on March 27, 2018. The note was issued at a 10% discount. The net proceeds received after issuance costs and fees was $63,750. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and original issue discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument. Additionally, the note is convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 55% multiplied by the lowest price of the common shares for the 20 trading prior to which the Notice of Conversion is received. If at any time the market price of the Company's common stock is trading below $0.50, then an additional 10% discount shall be factored into the Conversion Price, resulting in a discount of 55%. In the event the Company fails to maintain its status as "DTC Eligible" for any reason, or if the lowest trading prices of the common stock is equal to or lower than $0.01, then an additional 5% discount shall be factored into the Conversion Price, resulting in a total discount of 60%. The conversion formula created an embedded derivative conversion feature.
The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of June 30, 2018 dividend yield of zero, 365 days term to maturity, risk free interest rate of 2.33% and annualized volatility of 34.82%, valued at $74,579 and (ii) as of December 31, 2017 dividend yield of zero, 365 day term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%, valued at $1,679,176: The value of the conversion feature was assigned to the derivative liability and created a debt discount to be amortized over the life of the convertible debt.
During the period ended December 31, 2017, the convertible option of the debt was exercised, resulting in 635,910 shares issued for $5,656 in principal and $2,000 in accrued interest. Accrued interest related to this advance was $4,591 and $3,086 at June 30, 2018 and at December 31, 2017 respectively, and is included in accrued interest on the Balance Sheets.
Face Value balance as of June 30, 2018 is $29,344 and $69,344 as of December 31, 2017.
2 - On March 24, 2017, the Company entered into a potentially dilutive convertible advance with Eagle Equities LLC. The advance, with a face value of $75,000, bears interest at 8% per annum and is payable on March 24, 2018. The note was issued at a 10% discount. The net proceeds received after issuance costs and fees was $63,750. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and original issue discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument. Additionally, the note is convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 55% multiplied by the lowest price of the common shares for the 20 trading prior to which the Notice of Conversion is received. In the event the Company experiences a DTC Chill on its shares, the Conversion Price shall be decreased to 45% instead of 55% while that chill is in effect. If the Company fails to maintain the share reserve at the 4x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%. The conversion formula created an embedded derivative conversion feature.
The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of June 30, 2018: dividend yield of zero, 365 days term to maturity, risk free interest rate of 2.33% and annualized volatility of 34.82%, valued at $106,387 and (ii) as of December 31, 2017: dividend yield of zero, 83 days term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%, valued at $ 1,188,270. The value of the conversion feature was assigned to the derivative liability and created a debt discount to be amortized over the life of the convertible debt.
| 12 |
During the period ended December 31, 2017, the convertible option of the debt was exercised, resulting in 947,100 shares issued for $15,800 in principal and $756 in accrued interest. Accrued interest related to this advance was $6,437 and $5,244 at June 30, 2018 and December 31, 2017, respectively, and is included in accrued interest on the Balance Sheets. Face Value balance was $59,200 and $ 59,200 as of December 31, 2017 and June 30, 2018 respectively.
3 - On May 30, 2017, the Company entered into a potentially dilutive convertible advance with Power Up Lending Group, LTD. The advance, with a face value of $38,000, bears interest at 12% per annum and is payable on March 5, 2018. The note was issued at a 7% discount. The net proceeds received after issuance costs and fees was $35,000. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and original issue discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument. Additionally, the note is convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 60% multiplied by the lowest price of the common shares for the 20 trading prior to which the Notice of Conversion is received. The conversion formula created an embedded derivative conversion feature.
The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of June 30, 2018: dividend yield of zero, 35 day term to maturity, risk free interest rate of 2.33% and annualized volatility of 16.62%, valued at $6,273, and (ii) as of December 31, 2017: dividend yield of zero, 150 day term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%, valued at $553,851. The value of the conversion feature was assigned to the derivative liability and created a debt discount to be amortized over the life of the convertible debt.
During the period ended December 31, 2017, the convertible option of the debt was exercised, resulting in 545,930 shares issued for $7,955 in principal. During the period ended June 30, 2018 the convertible option of the debt was exercised, resulting in 310,902 shares issued for $48,578 in principal and $2,280 in accrued interest.
Accrued interest related to this advance was $2,686 and $2,387 at December 31, 2017 and June 30, 2018, respectively, and is included in accrued interest on the Balance Sheets. Face Value balance was $30,045 and $0 as of December 31, 2017 and June 30, 2018 respectively.
4 - On May 15, 2017, the Company entered into a potentially dilutive convertible advance with Kodiak Capital Group, LLC. The agreement provides that the Company may borrow up to $337,500. Borrowings under the line bear interest at 8% per annum and include a 10% issue discount. On May 15, 2017, drew against this debt facility. The net proceeds received after issuance costs and fees was $30,000. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and original issue discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument. Additionally, the note is convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 55% multiplied by the lowest price of the common shares for the 20 trading prior to which the Notice of Conversion is received. The conversion formula created an embedded derivative conversion feature.
The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of June 30, 2018: dividend yield of zero, 55 day term to maturity, risk free interest rate of 2.33% and annualized volatility of 16.62%, valued at $ 59,881, and (ii) as of December 31, 2017: dividend yield of zero, 135 day term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%. valued at $680,625. The value of the conversion feature was assigned to the derivative liability and created a debt discount to be amortized over the life of the convertible debt.
During the period ended December 31, 2017, the convertible option of the debt was exercised, resulting in 258,849 shares issued for $3,416 in principal. Accrued interest related to this advance was $3,317 and $1,890 at June 30, 2018 and December 31, 2017 respectively, and is included in accrued interest on the Balance Sheets. Face Value balance as of December 31, 2017 was $34,084 same as of June 30, 2018.
5 - On September 27, 2017, the Company entered into a potentially dilutive convertible advance with Power Up Lending Group, LLC. The advance, with a face value of $28,000, bears interest at 12% per annum and is payable on July 10, 2018. The note was issued at a 10% discount. The net proceeds received after issuance costs and fees was $25,000. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and original issue discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument. Additionally, the note is convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 58% multiplied by the lowest price of the common shares for the 15 trading prior to which the Notice of Conversion is received. The conversion formula created an embedded derivative conversion feature.
The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of June 30, 2018: dividend yield of zero, 88 day term to maturity, risk free interest rate of 2.33% and annualized volatility of 17.00%, valued at $44,537, and (ii) as of December 31, 2017: dividend yield of zero, 192 day term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%, valued at $353,071. The value of the conversion feature was assigned to the derivative liability and created a debt discount to be amortized over the life of the convertible debt.
During the period ended December 31, 2017, the convertible option of the debt was not exercised. During the period ended June 30, 2018, the convertible option of the debt was exercised, resulting in 187,533 shares issued for $14,140 in principal. Accrued interest related to this advance was $16,549 and $875 at June 30, 2018 and December 31, 2017, respectively, and is included in accrued interest on the Balance Sheets. At June 30, 2018 and December 31, 2017, the convertible notes payable were recorded at $13,860 and $28,000, respectively.
NOTE 7: RELATED PARTY LOANS: according to ASC 850, an entity and its principal owners and members of their immediate families are considered related parties.
Convertible Notes Payable
On February 21, 2018 Crown Bridge Partners LLC, sold part of its potentially dilutive convertible advance to D&D Capital, Inc, a related party. Accrued interest related to this advance was $1,855 and $0 at June 30, 2018 and December 31, 2017, respectively, and is included in accrued interest on the Balance Sheets. Face value balance as of June 30, 2018 is $40,000. The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of June 30, 2018 dividend yield of zero, 230 days term to maturity, risk free interest rate of 2.33% and annualized volatility of 4.22%, valued at $125,311. The value of the conversion feature was assigned to the derivative liability and created a debt discount to be amortized over the life of the convertible debt.
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Other Loans
The following loans bears no interest and due on demand:
| 1. | Consultant Capital Group, Inc | $ | 38,401 | |||
| 2. | D&D Capital, Inc | 16,000 | ||||
| Total Related Party no interest due on demand Loans | $ | 54,401 |
NOTE 8: EQUITY
On November 27, 2017, the Company issued 1,000,000 shares of Series A Convertible preferred stock for $125,000. The Preferred Stock is convertible in the Company's common stock. Each share of the Company's Series A Convertible preferred stock is convertible into 1,000 shares of the Company's common stock at a cost basis equivalent to par value per share, or $0.0001. Each share of the Series A Convertible preferred stock votes at the equivalent of 20,000 shares of common stock.
On January 10, 2018 the Company issued 37,000,000 common stock restricted shares, $0.0001 par value per share, converting 37,000 shares of the one million (1,000,000) Series A Preferred Stock,
On February 28, 2018 the Company issued 156,333 shares of common stock valued at the conversion price of $0.18. The shares were issued to convert $28,140 of the principal amount of the Note dated as of May 30, 2017 having as beneficiary to Power Up Lending Group Ltd.
On March 6, 2018 the Company issued 109,569 shares of common stock valued at the conversion price of $0.1753. The shares were issued to convert $16,928 of the principal amount and $2,280 of accrued and unpaid interest of the Note dated as of May 30, 2017 having as beneficiary to Power Up Lending Group Ltd.
On April 25, 2018 the Company issued 45,000 shares of common stock value at the conversion price of $0.078. The shares were issued to convert $3,510 of the principal amount of the Note dated as of May 30, 2017, having as beneficiary to Power Up Lending Group Ltd.
On April 25, 2018 the Company issued 187,533 shares of common stock value at the conversion price of $0.0754. The shares were issued to convert $14,140 of the principal amount of the Note dated as of September 27, 2017, having as beneficiary to Power Up Lending Group Ltd.
On May 3, 2018 the Company issued 2,500,000 shares of common stock at $0,0001 value having as beneficiary to Shelby White, which were subsequently cancelled in July 2018.
NOTE 9: COMMITMENTS AND CONTINGENCIES;
During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. As of June 30, 2018, the Company is not aware of any contingent liabilities that should be reflected in the accompanying consolidated financial statements.
NOTE 10: SUBSEQUENT EVENTS AFTER JUNE 30, 2018
The Company has evaluated subsequent events that occurred through the date of the filing of the Company's second quarter 2018 Form 10-Q.
Asset Purchase and Rescission
On January 31, 2018, the Company completed the purchase of the intellectual property assets of Simple Cork, Inc., a Florida corporation, and wholly-owned subsidiary of Vapor Group, Inc. (the "Asset Purchase").
On July 10, 2018, the Company, Vapor Group, Inc. and Simple Cork, Inc., the non-publicly-traded subsidiary company of Vapor Group, Inc. jointly announced that they had reached a settlement and resolution pertaining to the Asset Purchase, dated January 31, 2018, Under the terms and conditions of the settlement and resolution, the Asset Purchase Agreement in its entirety is rescinded ab initio. In its place, the Company and Vapor Group shall issue a share dividend of common stock of Simple Cork, Inc., which is being spun-off pursuant to the provisions of a Tier 2 Regulation A filing with the Securities and Exchange Commission not later than by Friday, September 14, 2018, which date has been set as the ex-dividend date or the
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issuance date for shareholders of record of either Company. The ratio of the quantity of shares of Simple Cork, Inc. to be issued per shares held of either of the Company and Vapor Group, Inc. will be announced at a later date.
In addition, each shareholder of the Company and Vapor Group, Inc. shall receive rights to acquire additional shares of Simple Cork, Inc. as the spun-off company at a 50% discount to the IPO price as set in the Reg A+ filing for new shareholders. The new Simple Cork, Inc. shareholders, not shareholders of the Company or Vapor Group, Inc., shall not be entitled to such rights.
The result is that neither the Company nor Vapor Group, Inc. will own the intellectual property assets of Simple Cork, Inc. Instead, Simple Cork, Inc., as a separate public entity, will own such intellectual property rights and will in turn be owned, separately, by its own shareholders. Simple Cork, Inc. shall separately assume responsibility for the development of “Simple Cork™”.
Share Issuances and Cancellations
On July 3, 2018 the Company cancelled the 2,500,000 shares of common stock at $0.0001 value having as beneficiary to Shelby White, such issuance was made in error.
On July 6, 2018 the Company issued 10,000,000 common stock restricted shares, $0.0001 par value per share, converting 10,000 shares of the one million (1,000,000) Series A Preferred Stock.
On July 6, 2018 the Company issued 1,715,961 shares of common stock value at the conversion price of $0.03897. The shares were issued to convert $59,200 of the principal amount and $7,671 interest of the Note dated as of March 24, 2017, having as beneficiary to Eagle Equities LLC.
On August 3, 2018 the Company issued 2,298,212 shares of common stock value at the conversion price of $0.0413. The shares were issued to convert $95,008.08 of principal, including penalty charge of the Note dated as of March 27, 2017, having as beneficiary to D&D Capital, Inc.
On August 6, 2018 the Company issued 50,000 common stock restricted shares, $0.0001 par value per share, to each of three persons, 150,000 shares total, for services rendered.
Change In Officers and Directors
On August 1, 2018, the Company appointed Dror Svorai, a member of its Board of Directors. Following Mr. Svorai’s appointment and acceptance as a member of the Board of Directors, the Board of Directors accepted the resignation of Yaniv Nahon as the President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and a member of the Board of Directors. Immediately following the resignation of Mr. Nahon, the Board of Directors appointed Dror Svorai, a member of the Board of Directors, as the Corporation’s President/Chief Executive Officer, Secretary, Treasurer and Chief Financial Officer of the Company. Therefore, the sole member of the Board of Directors is Dror Svorai. Mr. Nahon did not resign as a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Acquisition of Northway Mining, LLC and Pending Purchase Contract
On August 1, 2018, the Company entered into an acquisition agreement (the “Acquisition Agreement”) to acquire the majority ownership interest of Northway Mining, LLC (“Northway”). a New York limited liability company, located at 707 Flats Road, Athens, New York. Northway is a cryptomining data center hosting third-party owned and operated cryptomining machines within its 5000 square feet facility. It currently is hosting over 1,100 machines in its facilities at Flats Road under individual service agreements with third-party machine owners.
Pursuant to the Acquisition Agreement the Company acquired fifty-five percent (55%) of the ownership units of Northway in return for an investment of $1,100,000 (U.S.) for the purposes of providing working capital and funds to Northway for improvements to, and expansion of, its facilities, and the purchase of 30-acres of flat land and buildings at its Athens, New York address owned by a third party per that separate “Agreement for Purchase of Property between Northway Mining, LLC and CSX4236 Motorcycle Salvage LLC” (the “Land Purchase Agreement”). (The “Acquisition”) Under the terms and conditions of the Acquisition, Northway has amended and restated its New York State limited liability company Operating Agreement under which it is stated that it will maintain its current management.
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In addition, per the Acquisition Agreement, the Company is providing the current Northway management with a performance-based stock option for two and a half million (2,500,000) shares of the Company’s restricted common stock as earned over a period of six (6) months for the achievement of performance goals as established by the Board of Directors of the Company.
Separately in connection with the Acquisition Agreement, the Company assigned a purchase contract in total amount of $950,000 (“Purchase .Amount’) to Northway that it has entered into pending the closing of the Acquisition for the purchase of a building located at 2 Flint Mine Road, Coxsackie, NY 12051, SBL Nos. 71.00-1-20 and 71.00-1-3.112 (the “Purchase Contract”) which is to be used solely by Northway (the “Agreement for Purchase of Property between Mining Power Group, Inc. and Northway Mining, LLC” or the “Building Purchase Agreement”). Under the terms of Building Purchase Agreement, the Company shall pay on behalf of Northway, which shall own the building, $350,000 at closing, with Northway paying the remainder of the Purchase Amount over time per the terms of the Purchase Contract.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements and Associated Risks.
This form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may", "will", "expect", "believe", "anticipate", "estimate, or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include but are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.
Going Concern
Based on our financial history since inception, our auditor has expressed substantial doubt as to our ability to continue as a going concern. As reflected in the accompanying financial statements, as of June 30, 2018, we had an accumulated deficit totaling $1,426,611. This raises substantial doubts about our ability to continue as a going concern.
Plan of Operation
The Company was incorporated under the laws of the State of Florida on July 29, 2013. The Company was established to manufacture and distribute high-quality, hand rolled, premium cigars under the Rich Cigars brand name. Beginning on January 1, 2018 the Company wound down and discontinued its operations pertaining to the manufacture and distribution of cigars. Effective at the same date, the Company began the process of re-focusing its operations to become a holding company wherein its primary focus would be to own and operate subsidiary companies in the cryptocurrency business, principally companies either engaged in cryptocurrency mining directly, data center operations for cryptomining, or the development of proprietary products and services for the cryptocurrency business sector itself. The Company is confident that it will be able to implement its new focus and strategy in the third quarter of 2018.
Results of Operations
Three Months Ended June 30, 2018 Compared to June 30, 2017
For the three months ended June 30, 2018, we had $0 in revenues and $0 in cost of goods sold compared to $2,109 and $731 respectively for the same period one year earlier. For the three months ended June 30, 2018, our total operating expenses was $15,648 as compared to $155,441 for the three months ended June 30, 2017. For the three months ended June 30, 2018, we incurred expenses of $0 for officers’ compensation compared to $48,183 for the same period in 2017. For the three months ended June 30, 2018, we incurred professional fees in the amount of $15,618, compared to $19,051 for the corresponding period in 2017. For the three months ended June 30, 2018, we incurred $30 for other general and administrative expenses, compared to $20,347 for the same period in 2017. The changes in these categories and the reduction in total operating expenses were due to the wind down and discontinuation of the prior cigar business.
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For the three months ended June 30, 2018, we had ($74,573) in interest expenses compared to ($7,969) for the same period one year earlier. For the three months ended June 30, 2018, we had ($173,166) in Change in fair value of derivative liability and $514,616 for the same period one year earlier. For the three months ended June 30, 2018 we had $0 in Beneficial conversion feature and derivative interest compared to ($403,851) for the same period one year earlier. For the three months ended June 30, 2018 we had ($250) in Subscription receivable write off, compared to $0 as for the same period one year earlier. For the three months ended June 30, 2018 we had a Net Income(loss) of ($263,637) compared to ($51,267) for the same period one year earlier.
Six Months Ended June 30, 2018 Compared to June 30, 2017
For the six months ended June 30, 2018, we had $0 in revenues and $0 in cost of goods sold compared to $4,606 and $2,382 respectively for the same period one year earlier. For the six months ended June 30, 2018, our total operating expenses was $53,948 as compared to $269,824 for the six months ended June 30, 2017. For the six months ended June 30, 2018, we incurred expenses of $0 for officers’ compensation compared to $73,648 for the same period in 2017. For the six months ended June 30, 2018, we incurred professional fees in the amount of $30,167, compared to $47,963 for the corresponding period in 2017. For the six months ended June 30, 2018, we incurred $30 for other general and administrative expenses, compared to $25,249 for the same period in 2017. The changes in these categories and the reduction in total operating expenses were due to the wind down and discontinuation of the prior cigar business.
For the six months ended June 30, 2018, we had ($226,982) in interest expenses compared to ($8,266) for the same period one year earlier. For the six months ended June 30, 2018, we had $4,078,026 in Change in fair value of derivative liability and $438,792 for the same period one year earlier. For the six months ended June 30, 2018 we had ($498) in Fixed Asset Write-off and $0 for the same period one year earlier. For the six months ended June 30, 2018 we had $0 in Beneficial conversion feature and derivative interest compared to ($512,403) for the same period one year earlier. For the six months ended June 30, 2018 we had ($250) in Subscription receivable write off compared to $0 as for the same period one year earlier. For the six months ended June 30, 2018 we had a Net Income(loss) of $3,796,348 compared to ($349,477) for the same period one year earlier.
Liquidity and Capital Resources
As of June 30, 2018, our cash balance was $453 as compared to $0 at December 31, 2017. Our plan for satisfying our cash requirements for the next twelve months is through the sale of shares of our common stock, third party financing, and/or traditional bank financing. We do not anticipate generating sufficient amounts of revenues to meet our working capital requirements. Consequently, we intend to make appropriate plans to insure sources of additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities.
The Company must raise additional funds in order to fund our continued operations. We may not be successful in our efforts to raise additional funds or achieve profitable operations. Even if we are able to raise additional funds through the sale of our securities or through the issuance of debt securities, or loans from our directors or financial institutions our cash needs could be greater than anticipated in which case we could be forced to raise additional capital. At the present time, we have no commitments for any additional financing, and there can be no assurance that, if needed, additional capital will be available to us on commercially acceptable terms or at all. These conditions raise substantial doubt as to our ability to continue as a going concern, which may make it more difficult for us to raise additional capital when needed. If we cannot get the needed capital, we may not be able to become profitable and may have to curtail or cease our operations.
Operating Activities
During the six months ended June 30, 2018, the Company used cash in the amount of ($54,198) in operating activities, compared to ($244,860) over the same period in 2017.
Financing Activities
During the six months ended June 30, 2018, $54,651 in net cash was provided to the Company from its financing activities, compared to $240,600 over the same period in 2017.
We intend to seek additional funding through public or private financings to fund our operations through fiscal 2018 and beyond. However, if we are unable to raise additional capital when required or on acceptable terms, or achieve cash flow
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positive operations, we may have to significantly delay product development and scale back operations both of which may affect our ability to continue as a going concern.
Off Balance Sheet Arrangements
None
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.
Management has carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. Due to the lack of personnel and outside directors, management acknowledges that there are deficiencies in these controls and procedures. Thus, the results of this evaluation determined that our internal control over financial reporting was ineffective as of June 30, 2018.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II - OTHER INFORMATION
None.
Not Applicable to Smaller Reporting Companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On January 10, 2018 the Company issued 37,000,000 common stock restricted shares, $0.0001par value per share, converting 37,000 shares of the one million (1,000,000) Series A Preferred Stock, based on the Articles of Incorporation of First Intercontinental Technology, Inc, file with the State of Delaware in December 26, 2017, including, but not limited to, Section 4(a), “Automatic Conversion”, and 4(b) “Method of Conversion”.
On February 16, 2018 the Company issued 2,000,000 shares of common stock valued at the conversion price of $0.01963. The shares were issued to pay $39,250 from certain Convertible Promissory Note, dated March 27, 2017 between Rich Cigars, Inc and Crown Bridge Partners, LLC which sold the note to D&D Capital, Inc, who finally submitted the Conversion Note. On
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April 16, 2018, D&D Capital, Inc. cancelled the share issuance and returned the 2,000,000 shares. As a result of the cancellation, the Company will file an amend its 10-Q filed for the period ended March 31, 2018 to reflect the cancellation and to correct reporting errors.
On February 28, 2018 the Company issued 156,333 shares of common stock valued at the conversion price of $0.18. The shares were issued to pay $28,140 of the principal amount of the Note dated as of May 30, 2017 having as beneficiary to Power Up Lending Group Ltd.
On March 6, 2018 the Company issued 109,569 shares of common stock valued at the conversion price of $0.1753. The shares were issued to pay $19,928 of the principal amount and $2,280 of accrued and unpaid interest of the Note dated as of May 30, 2017 having as beneficiary to Power Up Lending Group Ltd.
On May 3, 2018, the Company issued 2,500,000 shares of restricted common stock to a Shelby White. The issuance was cancelled by the Company on July 3, 2018, as the issuance was in error.
On July 6, 2018 the Company issued 10,000,000 common stock restricted shares, $0.0001 par value per share, converting 10,000 shares of the 963,000 Series A Preferred Stock, based on the Articles of Incorporation of Power Mining Group, Inc, filed with the State of Colorado.
On July 6, 2018 the Company issued 1,715,961 shares of common stock value at the conversion price of $0.3897. The shares were issued to convert $59,200 of the principal amount and $7,671 interest of the Note dated as of March 24, 2017, having as beneficiary to Eagle Equities LLC.
On August 3, 2018 the Company issued 2,298,212 shares of common stock value at the conversion price of $0.0413. The shares were issued to convert $95,008.08 of principal, interest including penalty charge of the Note dated as of March 27, 2017, having as beneficiary to D&D Capital, Inc.
On August 6, 2018 the Company issued 50,000 common stock restricted shares, $0.0001 par value per share, to each of three persons, 150,000 shares total, for services rendered.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable.
Change In Officers and Directors.
On August 1, 2018, the Company appointed Dror Svorai to its Board of Directors. Following Mr. Svorai’s appointment and acceptance as a member of the Board of Directors, the Board of Directors accepted the resignation of Yaniv Nahon as the President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and a member of the Board of Directors. Immediately following the resignation of Mr. Nahon, the Board of Directors appointed Dror Svorai, a member of the Board of Directors, as the Corporation’s President/Chief Executive Officer, Secretary, Treasurer and Chief Financial Officer of the Company. Therefore, as of August 1, 2018, the sole member of the Board of Directors and sole officer of the Company is Dror Svorai.
Mr. Nahon did not resign as a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
The Company has not adopted, nor has it ever had in place, any procedures by which security holders may recommend nominees to the Company’s board of directors.
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Exhibits. The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MINING POWER GROUP, INC.
(Registrant)
Dated: August 20, 2018
By: /s/ Dror Svorai
Dror Svorai
(Chief Executive Officer, Principal Executive
Officer, Acting Chief Financial Officer
and Principal Accounting Officer)
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