Attached files
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| EX-32 - CANNA Corp | ex32_1.htm |
| EX-31 - CANNA Corp | ex31_1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017 |
or
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to _____________ |
333-199452
Commission file number
| Mining Power Group, Inc. |
| (Exact name of registrant as specified in its charter) |
| Colorado | 46-3289369 | |
| State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) | |
| 18851 Northeast 29th Avenue, Suite 700 Aventura, Florida | 33180-2875 | |
| (Address of principal executive offices) | (Zip Code) |
(800) 304-2657
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Common
Title of each class
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
o Yes x No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
o Yes x No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x Yes o No
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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). xYes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o Yes x No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o |
| Non-accelerated filer | o | 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 Act).
o Yes x No
The aggregate market value of our common shares of voting stock held by non-affiliates of our Company at June 30, 2017, computed by reference to the fixed price ($0.11) as of the last business day of the registrant’s most recently completed second fiscal quarter ended June 30, 2017, was $376,136.31.
As of April 13, 2018 there were 43,025,671 common shares, no par value, issued and outstanding.
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PART I
FORWARD LOOKING STATEMENTS
This form 10-K contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:
| · | the uncertainty of profitability based upon our history of losses; |
| · | risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern; |
| · | risks related to our operations and |
| · | other risks and uncertainties related to our business plan and business strategy. |
This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements. Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our consolidated financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “common stock” refer to the common shares in our capital stock.
GENERAL
The following is a summary of some of the information contained in this document. Unless the context requires otherwise, references in this document to “our Company,” “us,” “we,” “our,” “Mining Power Group,” “Rich Cigars” or the “Company” are to Mining Power Group, Inc.
CORPORATE OVERVIEW AND HISTORY OF MINING POWER GROUP, INC.
We were incorporated on July 29, 2013 under the laws of the state of Florida. Originally Rich Cigars, Inc. was established to manufacture and distribute cigars under the Rich Cigars brand name. The Company continually sought to create cigars that appealed to aficionados of high-quality, hand-rolled, premium cigars. One of the founders, Alfred Rushing, has been involved with the cigar industry for more than 20 years. The Company intended to introduce new styles of premium cigars, contracted with a Nicaraguan supplier for the manufacture of hand rolled cigars, which would be distributed and sold principally in the U.S. However, as the consolidated financial statements of the Company for fiscal year 2017 demonstrate, the Company has not been successful in generating adequate revenues in order to generate a net profit or a positive cashflow.
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As the result of a change of control of the Company on November 27, 2017, it was decided to wind down the cigar business over the coming months and have the Company enter into new, unrelated business areas. Until the new business strategies are ready for implementation, and a new management team engaged, Richard Davis, sole officer and director of the Company, has been retained on an interim basis.
As a result of the change in business, the Company redomiciled from Florida to Colorado and in doing so, changed its name to “Intercontinental Technology, Inc.” Under advice of counsel, on December 26, 2017, the Company, re-domiciled to Delaware under the terms and conditions of a Section 251(g) reorganization under Delaware General Corporation law (the “Reorganization”), and future adjusted its name to “First Intercontinental Technology, Inc.” due the unavailability of the name “Intercontinental Technology, Inc.” in the State of Delaware. The Reorganization was subsequently annulled and vitiated by the Company in February 2018, and the Company returned to Colorado under its current name “Mining Power Group, Inc.” and filed amended and restated Articles of Incorporation (collectively, the “February Corporate Changes”). The February Corporate Changes were filed with the Securities and Exchange Commission on Form 8-K on February 26, 2018.
On January 31, 2018, the Company purchased the proprietary, intellectual property assets, including patents and patents pending rights in nine (9) countries of Simple Cork, Inc., a Florida corporation, with the intent of development the assets into commercial products under the brand name, Simple Cork™ (the “Asset Purchase”). Terms of the Asset Purchase and its material documents were filed with the Securities and Exchange Commission on Form 8-K on February 6, 2018.
“Simple Cork™” represents a family of self-contained devices designed to revolutionize the opening of wine bottles sealed with a cork or a cork-like closure. Each product in the family provides a new level of customer convenience for wine customers and an elegant closure that represents a competitive advantage to wineries using it
Each device is comprised of a cork opener apparatus embedded into a cork or food-grade composite substrate which, in the primary version, has retractable, folding telescoping handles for efficient cork - pulling. It simplifies the act of opening a wine bottle in a safer and more secure way without depending on external devices such as cork-screws. Simple Cork™ makes obsolete the traditional cork screw opener, and also eliminates the risk of breaking the cork in the process and having cork pieces fall into the wine in the bottle – a common problem with cork-screws.
The strategic intent of the Company is to complete the development of the proprietary patent-protected Simple Cork™ product line during 2018-2019, with primary market introductions of the product line in the U.S. and Europe in 2019.
In February 2018 the Company announced that as a short-term strategy to generate revenue while the Company completes the development of Simple Cork™ and makes further investment in it, it would enter the burgeoning cryptomining business.
“Cryptomining” is the fundamental methodology of earning and/or creating digital currencies such as Bitcoin, Litecoin and others, through the use of dedicated, specialized mining machines that perform complex mathematical functions to mine a cryptocurrency and also process cryptocurrency transactions. These machines operate 24-hours per day, 7-days per week within mining-dedicated, temperature-controlled server centers that provide complete end-to-end technical and other support for “peace of mind” and uninterrupted operation.
As a result of the short-term focus on cryptomining, the Company renamed itself “Mining Power Group, Inc.” to accentuate the strategy. At the time of the filing of this report on form 10-K, the Company is exploring additional revenue-generating opportunities.
As the Company entered 2018, its legacy cigar business was discontinued as it focused its efforts in the new areas with its remaining inventory being liquidated.
EMPLOYEES
During 2017, the Company had up to five consultants including our current officer and sole director Richard Davis, and former officers and directors, Alfred Rushing, and Michael Rushing, under hourly oral consulting agreements, and former director Reginald Saunders under a written consulting agreement. There are no employees at this time
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other than the current officer and director. The Company does not have a written employment agreement with its officer and director at this time.
Our officer and director is responsible for planning, development and operational duties. The Company has no intention of hiring additional employees until it has sufficient, reliable revenue from our operations or supplemental third-party financing to support its new business direction.
REPORTS TO SECURITIES HOLDERS
We provide an annual report that includes audited financial information to our shareholders. We will make our financial information equally available to any interested parties or investors through compliance with the disclosure rules for a small business issuer under the Securities Exchange Act of 1934. We are subject to disclosure filing requirements including filing Form 10K annually and Form 10Q quarterly. In addition, we will file Form 8K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission, ("SEC"), at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
FORWARD LOOKING STATEMENTS
THIS DOCUMENT INCLUDES FORWARD-LOOKING STATEMENTS, INCLUDING, WITHOUT LIMITATION, STATEMENTS RELATING TO MINING POWER GROUP’ PLANS, STRATEGIES, OBJECTIVES, EXPECTATIONS, INTENTIONS AND ADEQUACY OF RESOURCES. THESE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS THAT MAY CAUSE OUR COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: OUR ABILITY OF TO IMPLEMENT OUR BUSINESS STRATEGY; ABILITY TO OBTAIN ADDITIONAL FINANCING; MINING POWER GROUP’ LIMITED OPERATING HISTORY; UNKNOWN LIABILITIES ASSOCIATED WITH FUTURE ACQUISITIONS; ABILITY TO MANAGE GROWTH; SIGNIFICANT COMPETITION; ABILITY TO ATTRACT AND RETAIN TALENTED EMPLOYEES; AND FUTURE GOVERNMENT REGULATIONS; AND OTHER FACTORS DESCRIBED IN THIS FILING OR IN OTHER OF MINING POWER GROUP’ FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. MINING POWER GROUP IS UNDER NO OBLIGATION, TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
RISKS RELATED TO OUR COMPANY AND THE BUSINESS
LIMITED OPERATING HISTORY
There can be no assurance that our management will be successful in its attempts to implement the our business plan, build the corporate infrastructure required to support operations at the levels called for by our business plan or that we will generate sufficient revenues to meet expenses or to achieve or maintain profitability. We will encounter risks and difficulties that companies at a similar stage of development frequently experience, including the potential failure to:
| · | Obtain sufficient working capital to support our establishment and expansion; |
| · | Find and realize the asset management opportunities required to generate revenue; |
| · | Maintain adequate control of our expenses allowing us to realize anticipated income growth; and |
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| · | Anticipate and adapt to changing conditions in the tobacco products industry resulting from changes in government regulations, mergers and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics. |
OUR MANAGEMENT TEAM HAS NO EXPERIENCE OPERATING A PUBLIC COMPANY. ANY FAILURE TO COMPLY OR ADEQUATELY COMPLY WITH FEDERAL AND STATE SECURITIES LAWS, RULES OR REGULATIONS COULD SUBJECT US TO FINES OR REGULATORY ACTIONS, WHICH MAY MATERIALLY ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
Members of our management team have no experience managing and operating a public company and may rely in many instances on the professional experience and advice of third parties including its attorneys and accountants. Failure to comply or adequately comply with any federal or state securities laws, rules, or regulations may result in fines or regulatory actions, which may materially adversely affect our business, results of operation, or financial condition and could result in delays in achieving either the effectiveness of a registration statement relating to the Securities being sold in this Offering or the development of an active and liquid trading market for our common stock.
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS EXPRESSED SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.
The audited consolidated financial statements included in the registration statement have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result if we cease to continue as a going concern. We have incurred significant losses since our inception. We have funded these losses primarily through the sale of securities.
Based on our financial history since inception, in their report on the consolidated financial statements for the year ended December 31, 2017, our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern. We are a development stage company that has not commenced revenue. There is no assurance that any revenue will be realized in the future.
There can be no assurance that we will have adequate capital resources to fund planned operations or that any additional funds will be available to us when needed or at all, or, if available, will be available on favorable terms or in amounts required by us. If we are unable to obtain adequate capital resources to fund operations, we may be required to delay, scale back or eliminate some or all of our operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern.
IF WE NEED ADDITIONAL CAPITAL TO FUND OUR FUTURE OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS.
If adequate additional financing is not available on reasonable terms, we may not be able to undertake sufficient sales and business development efforts required to identify clients and assist them with asset acquisitions, development of their real estate projects or management of existing stabilized assets, which may result in a negative impact to our cash flow and we would have to modify our business plans accordingly. There is no assurance that additional financing will be available to us.
In connection with our growth strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the development of similar products undertaken by our competition; (iii) the level of our investment in sales and marketing; and (iv) the amount of our capital expenditures, including corporate acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs.
In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these
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reasons, our common stock can also be expected to be subject to volatility resulting from purely market forces over which we will have no control.
If we cannot obtain additional funding, we may be required to: (i) limit our expansion; (ii) limit our marketing efforts; and (iii) decrease or eliminate capital expenditures. Such reductions could materially adversely affect our business and our ability to compete.
Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are favorable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to the Shares. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.
SHAREHOLDERS WILL EXPERIENCE DILUTION OF THEIR OWNERSHIP INTEREST BECAUSE OF THE FUTURE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK.
If we raise additional capital subsequent to hereto through the issuance of equity or convertible debt securities, the percentage ownership of our company held by existing shareholders will be reduced and those shareholders may experience significant dilution. In addition, we may also have to issue securities that may have rights, preferences and privileges senior to our common stock. In the event we seek to raise additional capital through the issuance of debt or its equivalents, this will result in increased interest expense.
WE WILL DEPEND UPON MANAGEMENT BUT WE MAY AT TIMES HAVE LIMITED PARTICIPATION OF MANAGEMENT
Our director is also acting as our sole officer. We will be heavily dependent upon their skills, talents, and abilities, as well as several consultants to us, to implement our business plan, and may, from time to time, find that the inability of the officer, director and consultants to devote their full-time attention to our business results in a delay in progress toward implementing our business plan. Consultants may be employed on a part-time basis under a contract to be determined.
Our director and officer is, or may become, in his individual capacity, an officer, director, controlling shareholder and/or partner of other entities engaged in a variety of businesses. Thus, our officer and director may have potential conflicts including their time and efforts involved in participation with other business entities. During 2017, each officer and director of our business, except for Richard Davis, is engaged in business activities outside of our business, and the amount of time they devote as Officers and Directors to our business will be up to 25 hours per week. During 2017, Richard Davis, President, worked full time pursuing the business plan. Because investors will not be able to manage our business, they should critically assess all of the information concerning our current officer and director.
We do not know of any reason other than outside business interests that would prevent them from devoting full-time to our Company, when the business may demand such full-time participation.
WE WILL BE DEPENDENT UPON KEY PERSONNEL FOR THE FORESEEABLE FUTURE.
We will be dependent on several key members of its management and operations teams for the foreseeable future. In particular, we have been and remain dependent on Richard Davis as our President. The loss of his services could have a material adverse effect on our operations and prospects. At this time, we have no employment agreements with any individuals, though it is contemplated that the Company may in the future enter into such agreements with certain of its key employees on terms and conditions usual and customary for its industry. We do not currently have any "key man" life insurance on any employees or our officer.
WE MAY REQUIRE ADDITIONAL FUNDING.
We are highly dependent on the infusion of additional capital through other private placements or loans supporting ongoing operations and expansion. If we are not successful in obtaining additional capital it could be necessary to
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seek additional financing elsewhere or to materially curtail our expansion plans. There can be no assurance that such other financing would be available to us on satisfactory terms or at all. Failure to obtain such financing could materially impair our ability to increase sales and achieve profitability.
WE ARE AN “EMERGING GROWTH COMPANY,” AND ANY DECISION ON OUR PART TO COMPLY ONLY WITH CERTAIN REDUCED DISCLOSURE REQUIREMENTS APPLICABLE TO “EMERGING GROWTH COMPANIES” COULD MAKE OUR COMMON STOCK LESS ATTRACTIVE TO INVESTORS.
We are an “emerging growth company,” as defined in the JOBS Act, and, for as long as we continue to be an “emerging growth company,” we expect and fully intend to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)2(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to opt in to the extended transition period for complying with the revised accounting standards. We have elected to rely on these exemptions and reduced disclosure requirements applicable to “emerging growth companies” and expect to continue to do so.
THE JOBS ACT ALLOWS US TO DELAY THE ADOPTION OF NEW OR REVISED ACCOUNTING STANDARDS THAT HAVE DIFFERENT EFFECTIVE DATES FOR PUBLIC AND PRIVATE COMPANIES.
Since, we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act, this election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our consolidated financial statements may not be comparable to companies that comply with public company effective dates.
BECAUSE OUR COMMON STOCK IS NOT REGISTERED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OUR REPORTING OBLIGATIONS UNDER SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, MAY BE SUSPENDED AUTOMATICALLY IF WE HAVE FEWER THAN 300 SHAREHOLDERS OF RECORD ON THE FIRST DAY OF OUR FISCAL YEAR.
Our common stock is not registered under the Exchange Act, and we do not intend to register our common stock under the Exchange Act for the foreseeable future (provided that, we will register our common stock under the Exchange Act if we have, after the last day of our fiscal year, $10,000,000 in total assets and either more than 2,000 shareholders of record or 500 shareholders of record who are not accredited investors (as such term is defined by the Securities and Exchange Commission), in accordance with Section 12(g) of the Exchange Act). As long as our common stock is not registered under the Exchange Act, our obligation to file reports under Section 15(d) of the Exchange Act will be automatically suspended if, on the first day of any fiscal year (other than a fiscal year in which a registration statement under the Securities Act has gone effective), we have fewer than 300 shareholders of record. This suspension is automatic and does not require any filing with the SEC. In such an event, we may cease providing periodic reports and current or periodic information, including operational and financial information, may not be available with respect to our results of operations.
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OUR BYLAWS PROVIDE FOR INDEMNIFICATION OF OFFICERS AND DIRECTORS AT OUR EXPENSE AND LIMIT THEIR LIABILITY WHICH MAY RESULT IN A MAJOR COST TO US AND HURT THE INTERESTS OF OUR SHAREHOLDERS BECAUSE CORPORATE RESOURCES MAY BE EXPENDED FOR THE BENEFIT OF OFFICERS AND/OR DIRECTORS.
Our Bylaws include provisions that eliminate the personal liability of the directors of the Company for monetary damages to the fullest extent possible under the laws of the State of Florida or other applicable law. These provisions eliminate the liability of directors to the Company and its stockholders for monetary damages arising out of any violation of a director of his fiduciary duty of due care. Under Florida law, however, such provisions do not eliminate the personal liability of a director for (i) breach of the director’s duty of loyalty, (ii) acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment of dividends or repurchases of stock other than from lawfully available funds, or (iv) any transaction from which the director derived an improper benefit. These provisions do not affect a director’s liabilities under the federal securities laws or the recovery of damages by third parties.
REPORTING REQUIREMENTS UNDER THE EXCHANGE ACT AND COMPLIANCE WITH THE SARBANES-OXLEY ACT OF 2002, INCLUDING ESTABLISHING AND MAINTAINING ACCEPTABLE INTERNAL CONTROLS OVER FINANCIAL REPORTING, ARE COSTLY AND MAY INCREASE SUBSTANTIALLY.
The rules and regulations of the SEC require a public company to prepare and file periodic reports under the Exchange Act, which will require that the Company engage legal, accounting, auditing and other professional services. The engagement of such services is costly. Additionally, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things, that we design, implement and maintain adequate internal controls and procedures over financial reporting. The costs of complying with the Sarbanes-Oxley Act and the limited technically qualified personnel we have may make it difficult for us to design, implement and maintain adequate internal controls over financial reporting. In the event that we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls, we may not be able to produce reliable financial reports or report fraud, which may harm our overall financial condition and result in loss of investor confidence and a decline in our share price.
We are working with our legal, accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas. However, we anticipate that the expenses that will be required in order to adequately prepare for being a public company could be material. We estimate that the aggregate cost of increased legal services; accounting and audit functions; personnel, such as a chief financial officer familiar with the obligations of public company reporting; consultants to design and implement internal controls; and financial printing alone will be a few hundred thousand dollars per year and could be several hundred thousand dollars per year. In addition, if and when we retain independent directors and/or additional members of senior management, we may incur additional expenses related to director compensation and/or premiums for directors’ and officers’ liability insurance, the costs of which we cannot estimate at this time. We may also incur additional expenses associated with investor relations and similar functions, the cost of which we also cannot estimate at this time. However, these additional expenses individually, or in the aggregate, may also be material.
In addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
The increased costs associated with operating as a public company may decrease our net income or increase our net loss and may cause us to reduce costs in other areas of our business or increase the prices of our products or services to offset the effect of such increased costs. Additionally, if these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations.
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WE MAY BE SUBJECT TO LITIGATION IN THE FUTURE WHICH COULD IMPACT THE FINANCIAL HEALTH OF THE COMPANY.
Currently there are no legal proceedings pending or threatened against the Company. However, from time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Litigation is subject to uncertainty and it is possible that there could be adverse developments in future cases.
DEPENDENCE UPON TRADEMARKS AND PROPRIETARY RIGHTS, FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS.
Our future success may depend on our ability to protect our current and future brands, products and services and to defend our intellectual property rights. In the future, we intend to seek trademark and patent registrations covering our brands, products and services, and expect to continue to file, trademark and patent applications seeking to protect newly developed brands, products and services. We cannot be sure that such registrations will be issued. There is also a risk that we could, by omission, fail to timely renew or protect a trademark or patent or that third parties will challenge, invalidate or circumvent any existing or future intellectual property rights issued to, or licensed by, us.
OUR INSURANCE COVERAGE OR THIRD-PARTY INDEMNIFICATION RIGHTS MAY NOT BE SUFFICIENT TO COVER OUR LEGAL CLAIMS OR OTHER LOSSES THAT WE MAY INCUR IN THE FUTURE.
In the future, insurance coverage may not be available at adequate levels or on adequate terms to cover potential losses, including on terms that meet our customer’s requirements. If insurance coverage is inadequate or unavailable, we may face claims that exceed coverage limits or that are not covered, which could increase our costs and adversely affect our operating results.
IF DEVELOPED, OUR BRANDS MAY BECOME VALUABLE, AND ANY INABILITY TO PROTECT THEM COULD REDUCE THE VALUE OF OUR BRANDS, PRODUCTS AND SERVICES.
We may invest significant resources to build and protect our brands, products and services. However, we may be unable or unwilling to strictly enforce our intellectual property rights from infringement. Our failure to enforce such rights could diminish the value of our brands, products and services and harm our business and future growth prospects.
IN THE FUTURE, AN INCREASE IN PRODUCT RETURNS COULD NEGATIVELY IMPACT OUR OPERATING RESULTS AND PROFITABILITY.
As it pertains to our development of future products, we will permit the return of damaged or defective products and accept limited amounts of product returns in certain instances. While such returns are expected to be nominal and within management’s expectations and the provisions established, future return rates may increase more than anticipated. Any significant increase in damaged or defective products or expected returns could have a material adverse effect on our operating results for the period or periods in which such returns materialize.
WE HAVE NO MANUFACTURING CAPACITY AND ANTICIPATE CONTINUED RELIANCE ON THIRD-PARTY MANUFACTURERS FOR THE DEVELOPMENT OF OUR PRODUCTS.
We do not currently operate manufacturing facilities nor expect to do so. We do not intend to acquire the resources and the capabilities to manufacture any of our future products. We will rely on third-party manufacturers to produce bulk products required to meet our sales needs. We plan solely to rely upon contract manufacturers to manufacture commercial quantities of our products.
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The failure of any contract manufacturer engaged by us to achieve and maintain for us high manufacturing standards, in accordance with applicable regulatory requirements, or the incidence of manufacturing errors, could result in consumer injury, product shortages, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously harm our business. Contract manufacturers often encounter difficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel. Our existing manufacturers and any future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business. In the event of a natural disaster, business failure, strike or other difficulty, we may be unable to replace a third-party manufacturer in a timely manner and the production of our products would be interrupted, resulting in delays, additional costs and reduced revenues.
A SHORTAGE IN THE SUPPLY OF KEY RAW MATERIALS COULD INCREASE OUR COSTS OR ADVERSELY AFFECT OUR SALES AND REVENUES.
Going forward, all of the raw materials for our future products will be obtained from third-party suppliers. Shortages in certain ingredients could result in materially higher raw material prices or adversely affect our ability to have a product manufactured. Price increases from a supplier would directly affect our profitability if we are not able to pass price increases on to customers. Our inability to obtain adequate supplies of raw materials in a timely manner or a material increase in the price of our raw materials could have a material adverse effect on our business, financial condition and results of operations.
DAMAGE TO OUR REPUTATION.
Maintaining a good reputation is critical to building our brands and selling our products and services. Product contamination or tampering or the failure to maintain our standards for product quality, safety and integrity, including with respect to raw materials, naturally occurring compounds, packaging materials or product components obtained from suppliers, may reduce demand for our products or cause production and delivery disruptions. Although our producer/distributors maintain standards for the materials and product components received from suppliers, it is possible that a supplier may not provide materials or product components that meet the required standards or may falsify documentation associated with the fulfillment of those requirements. If any of our products becomes unsafe or unfit for consumption, or causes injury, we may have to engage in a product recall and/or be subject to liability and incur additional costs. A widespread product recall, multiple product recalls, or a significant product liability judgment could cause our products to be unavailable for a period of time, which could further reduce consumer demand and brand equity. Our reputation could be impacted negatively by public perception, adverse publicity (whether or not valid), negative comments in social media, or our responses relating to:
| • | a perceived failure to maintain high ethical, social and environmental standards for all of our operations and activities; |
| • | a perceived failure to address concerns relating to the quality, safety or integrity of our products and services; |
| • | our environmental impact, including use of agricultural materials, packaging, water and energy use, and waste management; or |
| • | effects that are perceived as insufficient to promote the responsible use of our products. |
Failure to comply with local laws and regulations, to maintain an effective system of internal controls, to provide accurate and timely financial statement information, or to protect our information systems against service interruptions, misappropriation of data or breaches of security, could also hurt our reputation. Damage to our reputation or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and services and could have a material adverse effect on our business, financial condition and results of operations, as well as require additional resources to rebuild our reputation, competitive position and brand equity.
CONFLICTS OF INTEREST.
Certain conflicts of interest may exist between our Company and our officer and director. He may have other business interests to which he devotes attention and may be expected to continue to do so although management time should be devoted to the business of our Company. As a result, conflicts of interest may arise that can be resolved only through exercise of such judgment as is consistent with fiduciary duties to our Company.
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LIMITED REVENUE HISTORY.
Our Company is considered in development stage. Our Company must be regarded as a new or development venture with all of the unforeseen costs, expenses, problems, risks and difficulties to which such ventures are subject.
NO ASSURANCE OF SUCCESS OR PROFITABILITY.
There is no assurance that our Company will ever operate profitably. There is no assurance that we will generate profits, or that the value of our Company’s Shares will be increased thereby.
LACK OF DIVERSIFICATION.
Because of the limited financial resources that we have, it is unlikely that we will be able to diversify our operations. Our probable inability to diversify our activities into more than one area will subject us to economic fluctuations within our business or industry and therefore increase the risks associated with our operations.
DEPENDENCE UPON MANAGEMENT. LIMITED PARTICIPATION OF MANAGEMENT.
Our Company will be heavily dependent upon our management skills, talents, and abilities, as well as our consultants, to implement our business plan, and may, from time to time, find that their inability to devote full time attention to the business of our Company results in a delay in progress toward implementing our business plan.
DEPENDENCE UPON OUTSIDE ADVISORS.
To supplement the business experience of our officer and director, we may be required to employ accountants, technical experts, appraisers, attorneys, or other consultants or advisors. Our Company’s management, without any input from stockholders, will make the selection of any such advisors. Furthermore, it is anticipated that such persons may be engaged on an “as needed” basis without a continuing fiduciary or other obligation to our Company. In the event our Company considers it necessary to hire outside advisors, they may elect to hire persons who are affiliates, if they are able to provide the required services.
Based on our current cash reserves, we will have relatively small operational budget for the operations that we cannot expand without additional raising capital.
If we are unable to begin to generate enough revenue to cover our operational costs, we will need to seek additional sources of funds. Currently, we have no committed source for any funds as of date hereof. No representation is made that any funds will be available when needed. In the event funds cannot be raised if and when needed, we may not be able to carry out our business plan and could fail in business as a result of these uncertainties.
We cannot give any assurances that we will be able to raise enough capital to fund acquisitions and product development.
We will need to raise additional funds to support not only our budget, but also our expansion operations. We cannot make any assurances that we will be able to raise such funds or whether we would be able to raise such funds with terms that are favorable to us. We may seek to borrow monies from lenders at commercial rates, but such lenders will probably be at higher than bank rates, which higher rates could, depending on the amount borrowed, make the net operating income insufficient to cover the interest.
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Risks Related to Our Common Stock
WE MAY IN THE FUTURE ISSUE MORE SHARES WHICH COULD CAUSE A LOSS OF CONTROL BY OUR PRESENT MANAGEMENT AND CURRENT STOCKHOLDERS.
We may issue further shares as consideration for the cash or assets or services out of our authorized but unissued common stock that would, upon issuance, represent a majority of the voting power and equity of our Company. The result of such an issuance would be those new stockholders and management would control our Company, and persons unknown could replace our management at this time. Such an occurrence would result in a greatly reduced percentage of ownership of our Company by our current shareholders, which could present significant risks to investors.
WE HAVE NOT AND MAY NEVER PAY ANY DIVIDENDS TO SHAREHOLDERS.
We have not paid dividends on our common stock. We currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect to pay any dividends in the foreseeable future but will review this policy as circumstances dictate.
A LIMITED PUBLIC MARKET EXISTS FOR OUR COMMON STOCK AT THIS TIME, AND THERE IS NO ASSURANCE OF A FUTURE MARKET.
Our common stock has been quoted on the OTC Pink since November 16, 2016, under the symbol “RCGR.” There is a limited public market for our common stock, and no assurance can be given that a market will continue or that a shareholder ever will be able to liquidate his investment without considerable delay, if at all. If a market should develop, the price may be highly volatile. Factors such as those discussed in the “Risk Factors” section may have a significant impact upon the market price of the shares offered hereby. Due to the low price of our securities, many brokerage firms may not be willing to effect transactions in our securities. Even if a purchaser finds a broker willing to effect a transaction in our shares, the combination of brokerage commissions, state transfer taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of our shares as collateral for any loans.
OUR COMMON STOCK IS CONSIDERED A PENNY STOCK, WHICH MAY BE SUBJECT TO RESTRICTIONS ON MARKETABILITY, SO YOU MAY NOT BE ABLE TO SELL YOUR SHARES.
We may be subject now and in the future to the SEC’s “penny stock” rules if our shares of common stock sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.
In addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their securities.
In addition, the Securities and Exchange Commission has adopted a number of rules to regulate “penny stocks”. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute “penny stocks” within the meaning of the rules, the rules would apply to us and to our securities. The rules will further affect the ability of owners of shares to sell our securities in any market that might develop for them because it imposes additional regulatory burdens on penny stock transactions.
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Shareholders should be aware that, according to Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.
RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON OUR STOCK PRICE.
Our shareholders may be able to use Rule 144 as an exemption for resale, but resales under Rule 144 could have a depressive effect on the market-trading price, if any. Investors will have no effective way to combat this.
OUR SHARES ARE THINLY TRADED.
The shares of our common stock may continue to be thinly-traded on the OTC Markets under the symbol RCGR, meaning that the number of persons interested in purchasing our common shares at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase of any of our Securities until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our Securities is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on Securities price. We cannot give you any assurance that an active public trading market for our common Securities will ever develop or be sustained, or that any trading levels will be sustained. Due to these conditions, we can give investors no assurance that they will be able to sell their shares at or any prices or at all if they need money or otherwise desire to liquidate their securities of our Company. Our common stock may not be able to be liquidated at or near ask prices in any volume in the markets.
OUR COMMON STOCK MARKET PRICES MAY BE VOLATILE, WHICH SUBSTANTIALLY INCREASES THE RISK THAT INVESTORS MAY NOT BE ABLE TO SELL THEIR SECURITIES AT OR ABOVE THE PRICE THAT WAS PAID FOR THE SECURITY.
Because of the limited trading market for our common stock and because of the possible price volatility, shareholders may not be able to sell their shares of common stock when desired. The inability to sell common stock in a rapidly declining market may substantially increase the risk of loss because of such illiquidity and because the price for our common stock may suffer greater declines because of our price volatility.
Certain factors, some of which are beyond our control, that may cause our share price to fluctuate significantly include, but are not limited to the following:
| ● | Variations in our quarterly operating results; |
| ● | Loss of a key relationship or failure to complete significant transactions; |
| ● | Additions or departures of key personnel; and |
| ● | Fluctuations in stock market price and volume. |
Additionally, in recent years the stock market in general has experienced extreme price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying company. These market factors may materially and adversely affect our stock price, regardless of our operating performance. In the past, class action litigation often has been brought against companies following periods of
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volatility in the market price of those companies common stock. If we become involved in this type of litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on shareholders’ investments in our stock.
FUTURE DILUTION MAY OCCUR DUE TO ISSUANCES OF SHARES FOR VARIOUS CONSIDERATION IN THE FUTURE.
There may be substantial dilution to our shareholders as a result of future decisions of the Board to issue shares without shareholder approval for cash, services, acquisitions, or pursuant to any future Employee/Consultant Stock Option Plan.
OUR NEW INVESTORS WILL SUFFER A DISPROPORTIONATE RISK AND THERE WILL BE IMMEDIATE DILUTION OF PURCHASERS' INVESTMENTS.
Our present shareholders have acquired their securities at a cost significantly less than that which the investors purchasing pursuant to warrants will pay for their stock holdings or at which future purchasers in the market may pay. Therefore, new investors will bear most of the risk of loss.
OUR BUSINESS IS HIGHLY SPECULATIVE AND THE INVESTMENT IS THEREFORE HIGHLY RISKY.
Due to the speculative nature of our business, it is probable that the investment in shares offered hereby will result in a total loss to the investor. Investors should be able to financially bear the loss of their entire investment. Investment should, therefore, be limited to that portion of discretionary funds not needed for normal living purposes or for reserves for disability and retirement.
The ongoing economic downturn and continued uncertainty in the financial markets and other adverse changes in general economic or political conditions may adversely affect our industry, business and results of operations.
The global credit and financial markets have continued to experience disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. There can be no assurance that there will not be future deterioration in credit and financial markets and confidence in economic conditions. These economic uncertainties affect businesses such as ours in a number of ways, making it difficult to accurately forecast and plan our future business activities. We are unable to predict the likely duration and severity of the current disruptions in the credit and financial markets and adverse global economic conditions, and if the current uncertain economic conditions continue or further deteriorate, our business and results of operations could be materially and adversely affected.
POTENTIAL CHANGES IN ACCOUNTING PRACTICES AND/OR TAXATION MAY ADVERSELY AFFECT OUR FINANCIAL RESULTS.
We cannot predict the impact that future changes in accounting standards or practices may have on our financial results. New accounting standards could be issued that change the way we record revenues, expenses, assets and liabilities. These changes in accounting standards could adversely affect our reported earnings. Increases in direct and indirect income tax rates could affect after tax income. Equally, increases in indirect taxes could affect our products affordability and reduce our sales.
WE WILL RELY ON THIRD PARTIES FOR SERVICES IN CONDUCTING OUR BUSINESS AND ANY DISRUPTION OF THESE RELATIONSHIPS COULD ADVERSELY AFFECT OUR BUSINESS.
We will have contracts with third parties. If these relationships are disrupted for any reason our results of operation and financial condition could be adversely affected.
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REPORTING INFORMATION.
Our Company is subject to the reporting requirements under the Securities and Exchange Act of 1934. As a result, shareholders will have ready access to the information required to be reported by publicly held companies under the Securities and Exchange Act and the regulations thereunder. Our Company intends to provide our shareholders with annual reports containing financial information prepared in accordance with Generally Accepted Accounting Principles as required by Sec. 13 of the Securities Exchange Act of 1934.
LIMITED FINANCING – LACK OF LOAN AVAILABILITY.
The monies currently on hand may not be sufficient for the continued expanded operations of our Company. There is no assurance that additional monies or financing will be available in the future or, if available, will be at terms favorable to our Company. (See “Business Summary”)
Our Company may borrow money to finance its operations on terms to be determined. Any such borrowing will increase the risk of loss to the investor in the event our Company is unsuccessful in repaying such loans.
CAPITAL RESOURCES.
The only capital resources of our Company are our shares.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
REAL ESTATE.
None.
OIL AND GAS.
None.
PATENTS.
None.
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suite, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officer of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. We anticipate that we (including current and any future subsidiaries) will from time to time become subject to claims and legal proceedings arising in the ordinary course of business. It is not feasible to predict the outcome of any such proceedings and we cannot assure that their ultimate disposition will not have a materially adverse effect on our business, financial condition, cash flows or results of operations.
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ITEM 4. MINE SAFETY DISCLOSURE.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is currently quoted on the OTC Pink. Our common stock was approved for quotation on the OTC Pink on November 16, 2016, under the symbol “RCGR.” Because we are quoted on the OTC Pink, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.
The following table sets forth the high and low bid quotations for our common stock as reported on the OTC Pink for the periods indicated.
| Fiscal 2016 | Low | High | ||||||
| First Quarter – ended March 31, 2016 | $ | N/A | $ | N/A | ||||
| Second Quarter – ended June 30, 2016 | $ | N/A | $ | N/A | ||||
| Third Quarter – ended September 30, 2016 | $ | N/A | $ | N/A | ||||
| Fourth Quarter – ended December 31, 2016 | $ | .01 | $ | .01 | ||||
| Fiscal 2017 | Low | High | ||||||
| First Quarter – ended March 31, 2017 | $ | .01 | $ | 1.58 | ||||
| Second Quarter – ended June 30, 2017 | $ | .11 | $ | .71 | ||||
| Third Quarter – ended September 30, 2017 | $ | .07 | $ | .68 | ||||
| Fourth Quarter – ended December 31, 2017 | $ | .02 | $ | .51 | ||||
Holders.
As of December 31, 2017, there are approximately 30 record holders of 3,915,421 shares of our common stock.
Dividends.
We have not paid any cash dividends to date and do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of our business.
Securities Authorized for Issuance Under Equity Compensation Plans.
None.
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Recent Sales of Unregistered Securities.
During the fiscal year ended December 31, 2017 and 2016, we made the following sales of our unregistered shares.
| DATE OF SALE (1) | TITLE OF SECURITIES | NO. OF SHARES | CONSIDERATION | CLASS OF PURCHASER |
| August 2016 | Common Shares | 125,080 | $12,508 | Accredited Investors |
| September 2016 | Common Shares | 20,000 | $2,000 | Accredited Investors |
| September 2016 | Common Shares | 112,500 | Consulting Services of approximately $11,250 | Business Associates |
| November 27, 2017 | Series A Preferred Shares | 1,000,000 (2) | $125,000 | Accredited Investors |
| (1) | Date of first sale. Securities sold pursuant to a Rule 506(b) exemption. |
| (2) | The purchase of the Preferred Shares was directly from the Company under a Subscription Agreement, and constituted a “change of control” of the Company since the Preferred Shares purchased represent over 60% of the voting control of the Company. The Preferred Shares were authorized pursuant to an amendment to the Articles of Incorporation of the Company filed with the Secretary of State of Florida on April 27, 2017. |
EXEMPTION FROM REGISTRATION CLAIMED
All of the above sales by our Company of our unregistered securities were made by us in reliance upon Rule 506 of Regulation D and Section 4(a)(2) of the Securities Act of 1933, as amended (the "1933 Act"). All of the individuals and/or entities that purchased the unregistered securities were either primarily existing shareholders, sophisticated shareholders, consultants or sophisticated investors known to us and our management, through pre-existing business relationships. All purchasers were provided access to all material information, which they requested, and all information necessary to verify such information and were afforded access to management of our Company in connection with their purchases. All purchasers of the unregistered securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to us. All certificates or agreements representing such securities that were issued contained restrictive legends, prohibiting further transfer of the certificates or agreements representing such securities, without such securities either being first registered or otherwise exempt from registration in any further resale or disposition.
ISSUER PURCHASES OF EQUITY SECURITIES
We did not repurchase any shares of our common stock during the year ended December 31, 2017.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements and Associated Risks.
This form 10-K 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-K 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.
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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 consolidated financial statements, as of December 31, 2017, we had an accumulated deficit totaling $4,904,654. This raises substantial doubts about our ability to continue as a going concern.
Plan of Operation
Originally the Company was established to manufacture and distribute high-quality, hand rolled, premium cigars under the Rich Cigars brand name. Effective on January 1, 2018, the Company chose to wind down and discontinue the cigar business over the period of the first quarter 2018 in favor of pursuing on a long term basis the development and manufacture of its proprietary patent-protected Simple Cork™ line of products, and on a short-term basis generating revenues through cryptomining by the purchase of cryptomining machines to be based in data center facilities.
As a result, the Company is forming subsidiaries to invest in (1) the development and multinational marketing of Simple Cork™, and (2) the development of a unique cryptocurrency mining business for Bitcoin and other cryptocurrencies which will operate on a 24/7 basis.
The Company's primary operations are in the Miami, Florida area, and management intends to conduct our business principally in the U.S.
Results of Operations
For the year ended December 31, 2017, we had $4,606 in revenues compared to $4,863 for the year ended December 31, 2016. For the year ended December 31, 2017, Officers Compensation was $75,520 compared to $91,896 for the previous year, Professional Fees and Travel Expenses increased by $45,538 and $1,835, respectively, over the previous year, and Marketing Expenses increased to $32,095 from $36,348 in the previous year. We incurred $426 in Depreciation and $6,800 in Amortization expenses in the current year compared to $426 and $1,700 for the previous year. For the year ended December 31, 2017 we incurred an operating loss of $355,341. This compares to the net loss of $244,178 for the year ended December 31, 2016. During the period ended December 31, 2017, the Company wrote off inventory in the amount of $24,625 as it was determined to be obsolete due to the Company’s change in strategic direction.
Our auditor has expressed substantial doubt as to whether we will be able to continue to operate as a “going concern” due to the fact that the Company has an accumulated deficit of $4,904,654 as of December 31, 2017 and has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining the adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
Financing Activities
During the year ended December 31, 2017, the Company entered into the following financing activities:
On March 27, 2017, the Company entered into a 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. Additionally, the note is convertible at the holder’s discretion into shares of the Company’s common stock based on a conversion formula of 45% 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%. As of December 31, 2017, the Company has drawn a $75,000 credit line against this facility. The net proceeds received after discount was $63,750.
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On March 24, 2017, the Company entered into a 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. 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%.
On May 30, 2017, the Company entered into a 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. 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.
On May 15, 2017, the Company entered into a 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. The maturity date for each tranche funded shall be 12 months from the effective date of each tranche. 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. As of December 31, 2017, the Company has drawn a $37,500 credit line against this facility. The net proceeds received after discount was $30,000.
On September 27, 2017, the Company entered into a convertible advance with PowerUp Lending Group, LTD. 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 cost and fees was $25,000. 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 20 trading days prior to which the Notice of Conversion is received.
The conversion formula of each of the above notes created an embedded derivative conversion feature the value of which is stated on the Balance Sheet of December 31, 2017.
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.
During the years ended December 31, 2016 the Company received $14,508 in private placement subscriptions for the Company’s common stock and issued 145,080 shares. During the year ended December 31, 2016 the Company issued 112,500 to a contractor for services rendered and valued at $11,250. During the year ended December 31, 2017 the Company issued 200,000 to a contractor for services rendered and valued at $20,000.
During the year ended December 31, 2017 and 2016, the Company received $216,580 and $65,405, respectively in shareholder contributions to be used in the Company’s regular activities. As of December 31, 2017, the Company has used these proceeds on the Company’s operations and purchases.
Investing Activities
The Company had no investing activities for the years ended December 31, 2017 and 2016.
Liquidity and Capital Resources
As of December 31, 2017, our cash balance was $nil as compared to $4,260 at December 31, 2016. Our plan for satisfying our cash requirements for the next twelve months is through third party financing. We do not anticipate generating sufficient
| 21 |
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 year ended December 31, 2017, the Company used cash in the amount of $315,495 in operating activities, which is an increase of $117,194 over the previous year, $233,884.
Off Balance Sheet Arrangements
None
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Act of 1934 and are not required to provide the information under this item.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
MINING POWER GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM – HAYNIE & COMPANY CPA’S |
23 | |||
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM – PRITCHETT, SILER & HARDY, P.C. |
24 | |||
| CONSOLIDATED BALANCE SHEETS | 25 | |||
| CONSOLIDATED STATEMENTS OF OPERATIONS | 26 | |||
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY | 27 | |||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | 28 | |||
| CONSOLIDATED NOTES TO FINANCIAL STATEMENTS | 29 | |||
| 22 |
Certified
Public Accountants
(a professional
corporation)
50 West Broadway, Suite 600 Salt Lake City, UT 84101 (801) 532-7800 Fax (801) 328-4461
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Mining Power Group, Inc. (formerly known as Rich Cigars, Inc.)
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Mining Power Group, Inc. (formerly known as Rich Cigars, Inc.) (the Company) as of December 31, 2017, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year ended December 31, 2017, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has incurred losses since inception, has negative cash flows from operations, and has negative working capital. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Haynie & Company
Salt Lake City, Utah April 24, 2018
We have served as the Company’s auditor since 2017.
 |
1785 West Printers Row | 5974 South Fashion Pointe Dr. Suite 120 | 1221 West Mineral Avenue, Suite 202 | 873 North Cleveland Avenue | 2702 N. Loop 1604 East, Suite 202 |
| As association of | Salt Lake City, Utah 84119 | South Ogden, Utah 84403 | Littleton, Colorado 80120-4544 | Loveland, Colorado 80537 | San Antonio, Texas 78232 |
| Independent Accounting Firms | (801) 972-4800 | (801) 479-4800 | (303) 734-4800 | (303) 577-4800 | (210) 979-0055 |
| 23 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Rich Cigars, Inc. (now known as Mining Power Group, Inc.)
18851 NE 29th Avenue, Suite 700
Aventura FL 33180
We have audited the accompanying balance sheet of Rich Cigars, Inc. (now known as Mining Power Group, Inc.) as of December 31, 2016, and the related statements of operations, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rich Cigars, Inc. (now known as Mining Power Group, Inc.) as of December 31, 2016 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered continuing losses and has not yet established a reliable, consistent and proven source of revenue to meet its operating costs on an ongoing basis and currently does not have sufficient available funding to fully implement its business plan. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Pritchett, Siler & Hardy, P.C.
Pritchett, Siler & Hardy, P.C.
Salt Lake City, Utah
March 30, 2017
| 24 |
Mining Power Group, Inc. (Formerly known as Rich Cigars, Inc.) | ||||||||
| Consolidated Balance Sheets | ||||||||
| December 31, 2017 | December 31, 2016 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | — | $ | 4,260 | ||||
| Accounts receivable, net | — | — | ||||||
| Inventory | — | — | ||||||
| Prepaid expenses | 4,500 | — | ||||||
| Assets of discontinued operations | 498 | 37,834 | ||||||
| Total current assets | 4,998 | 42,094 | ||||||
| Property and Equipment, net | — | — | ||||||
| Intangible Assets, net | — | — | ||||||
| Total Fixed Assets | — | — | ||||||
| Total assets | $ | 4,998 | $ | 42,094 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | — | — | |||||
| Accrued interest | 11,917 | — | ||||||
| Derivative liability | 4,454,993 | — | ||||||
| Convertible note, net of discounts of $190,634 and $0 | 30,040 | — | ||||||
| Liabilities of discontinued operations | — | 12,991 | ||||||
| Total current liabilities | 4,496,950 | 12,991 | ||||||
| Total liabilities | 4,496,950 | 12,991 | ||||||
| Commitments and Contingencies | — | — | ||||||
| Series A Convertible
Preferred stock; $0.0001 par value; 1,000,000 shares authorized; 1,000,000 and 0 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively | 125,000 | — | ||||||
| Shareholders' equity (deficit): | ||||||||
| Preferred stock other designations; $0.0001 par value; 10,000,000 shares authorized; 0 and 0 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively | ||||||||
| Common stock; $0.0001 par value; 100,000,000 shares authorized; | ||||||||
| 3,915,769 and 2,612,980 shares issued and outstanding | ||||||||
| at December 31, 2017 and December 31, 2016, respectively | 392 | 262 | ||||||
| Additional Paid in Capital | 605,615 | 581,427 | ||||||
| Accumulated deficit | (5,222,959 | ) | (552,586 | ) | ||||
| Total shareholders' equity (deficit) | (4,616,952 | ) | 29,103 | |||||
| Total liabilities and shareholders' equity (deficit) | $ | 4,998 | $ | 42,094 | ||||
See accompanying notes to the consolidated financial statements.
| 25 |
Mining Power Group, Inc. (Formerly known as Rich Cigars, Inc.) | ||||||||
| Consolidated Statements of Operations | ||||||||
| Year Ended | ||||||||
| December 31, 2017 | December 31, 2016 | |||||||
| REVENUES | $ | — | $ | — | ||||
| COST OF SALES | — | — | ||||||
| GROSS PROFIT | — | — | ||||||
| Operating Expenses | — | — | ||||||
| Operating Loss | — | — | ||||||
| Interest Expense | (14,673 | ) | — | |||||
| Amortization of discount and issuance cost on convertible notes payable | (62,866 | ) | — | |||||
| Derivative Interest | (372,697 | ) | — | |||||
| Change in fair value of derivative liability | (3,864,796 | ) | — | |||||
| Total other income (expense) | (4,315,032 | ) | — | |||||
| Loss from continuing operations | (4,315,032 | ) | — | |||||
| Loss from discontinued operations | (355,341 | ) | (244,178 | ) | ||||
| NET LOSS | $ | (4,670,373 | ) | $ | (244,178 | ) | ||
| Net
loss per share applicable to common stockholders — basic and diluted | $ | (1.62 | ) | $ | (0.10 | ) | ||
| Weighted average number of common shares outstanding – basic | 2,885,798 | 2,442,404 | ||||||
See accompanying notes to the consolidated financial statements.
| 26 |
Mining Power Group, Inc.
(Formerly known as Rich Cigars, Inc.)
Consolidated Statements of Shareholders’ Equity (Deficit)
| Common Shares | Common Stock | Additional Paid in Capital | Accumulated Deficit | Total Shareholders' Deficit | ||||||||||||||||
| BALANCE, December 31, 2015 | 2,355,400 | $ | 236 | $ | 339,115 | $ | (308,408 | ) | $ | 30,943 | ||||||||||
| Shareholder contributions | 216,580 | 216,580 | ||||||||||||||||||
| Issuance of shares for cash | 145,080 | 15 | 14,493 | 14,534 | ||||||||||||||||
| Issuance of shares for services | 112,500 | 11 | 11,239 | 11,250 | ||||||||||||||||
| Net Loss | (244,178 | ) | (244,178 | ) | ||||||||||||||||
| BALANCE, December 31, 2016 | 2,612,980 | $ | 262 | $ | 581,427 | $ | (552,586 | ) | $ | 29,103 | ||||||||||
| Shareholder contributions | 65,405 | 65,405 | ||||||||||||||||||
| Return of Capital | (25,000 | ) | (25,000 | ) | ||||||||||||||||
| Treasury shares purchased and cancelled | (1,285,000 | ) | (129 | ) | (71,542 | ) | (71,671 | ) | ||||||||||||
| Issuance of shares for convertible debt | 2,387,789 | 239 | 35,345 | 35,584 | ||||||||||||||||
| Issuance of shares for services | 200,000 | 20 | 19,980 | 20,000 | ||||||||||||||||
| Net Loss | (4,670,373 | ) | (4,670,373 | ) | ||||||||||||||||
| BALANCE, December 31, 2017 | 3,915,769 | $ | 392 | $ | 605,615 | $ | (5,222,959 | ) | $ | (4,616,952 | ) | |||||||||
See accompanying notes to the consolidated financial statements.
| 27 |
Mining Power Group, Inc. (Formerly known as Rich Cigars, Inc.) | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| Year ended | ||||||||
| December 31, 2017 | December 31, 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Loss from continuing operations | $ | (4,315,032 | ) | $ | — | |||
| Adjustments to reconcile net loss to net cash | ||||||||
| used in operating activities: | ||||||||
| Beneficial conversion feature and derivative interest | 372,697 | — | ||||||
| Change in derivative liability | 3,864,796 | — | ||||||
| Amortization of discount on convertible notes payable | 62,866 | — | ||||||
| Accrued interest | 14,673 | |||||||
| Net cash used in operating activities - continuing operations | — | — | ||||||
| Net cash used in operating activities - discontinued operations | (315,495 | ) | (233,884 | ) | ||||
| Net cash used in operating activities | (315,495 | ) | (233,884 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from preferred share issuance | 125,000 | — | ||||||
| Proceeds from common share issuance | — | 14,508 | ||||||
| Proceeds from notes payable | 217,500 | — | ||||||
| Shareholder contribution | 65,405 | 216,580 | ||||||
| Capital reduction | (25,000 | ) | ||||||
| Purchase of treasury stock | (71,670 | ) | ||||||
| Net cash provided by financing activities – continuing operations | 311,235 | 231,088 | ||||||
| Net cash provided by financing activities – discontinued operations | — | — | ||||||
| Net cash provided by financing activities | 311,235 | 231,088 | ||||||
| NET CHANGE IN CASH | (4,260 | ) | (2,796 | ) | ||||
| CASH, beginning of period | 4,260 | 7,056 | ||||||
| CASH, end of period | $ | — | $ | 4,260 | ||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Cash paid for interest | $ | — | $ | — | ||||
| Cash paid for income taxes | $ | — | $ | — | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Conversion of debt and accrued interest into common stock | $ | 35,583 | $ | — | ||||
See accompanying notes to the consolidated financial statements.
| 28 |
Mining Power Group, Inc.
(Formerly known as Rich Cigars, Inc.)
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and 2016
NOTE 1 NATURE OF ORGANIZATION
Mining Power Group, Inc. formerly known as Rich Cigars, Inc. (the "Company") is 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 has 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. Additionally, the Company has subsidiaries in fields unrelated to the traditional business, which is being phased out. 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 RECLASSIFICATION OF PRIOR YEAR PRESENTATION
Certain prior year amounts have been reclassified for consistency with the current period presentation. Additionally, certain expense items have been broken out differently. Previously, the Company had netted its stock subscription receivables against common stock. In the current period the Company concluded that it was more appropriate to present these subscription receivables separately in the Balance Sheet and in the Statement of Shareholders’ Equity (Deficit). 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.
NOTE 3 GOING CONCERN
These 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 December 31, 2017, the Company has incurred net losses of $5,222,959 since inception. This raises substantial doubt about the Company’s ability to continue as a going concern.
| 29 |
Mining Power Group, Inc.
(Formerly known as Rich Cigars, Inc.)
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and 2016
Management's plans include raising capital through the equity markets to fund operations and eventually, the 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 year ended December 31, 2016, assets of discontinued operations consisted of property and equipment of $924, intangible assets of $6,800, and inventory and other assets of $30,110. As of December 31, 2017, there were no liabilities of discontinued operations. As of December 31, 2016, there was outstanding AP balance of $12,991.
Results of the discontinued operations as of December 31, 2017 are as follows:
| December 31, 2017 | December 31, 2016 | |||||||
| REVENUES | $ | 4,606 | $ | 4,863 | ||||
| COST OF SALES | 2,382 | 2,157 | ||||||
| GROSS PROFIT | 2,224 | 2,706 | ||||||
| OPERATING EXPENSES | ||||||||
| Officers Compensation | 75,520 | 91,896 | ||||||
| Professional Fees | 67,554 | 22,016 | ||||||
| Travel Expense | 45,874 | 44,039 | ||||||
| Legal Fees | 42,550 | 16,654 | ||||||
| Marketing Expense | 32,095 | 36,348 | ||||||
| Rent expense | 29,995 | — | ||||||
| Inventory obsolescence expense | 24,625 | — | ||||||
| Accounting and Audit | 11,704 | 14,449 | ||||||
| Meals and Entertainment | 10,544 | 6,443 | ||||||
| Amortization Expense | 6,800 | 1,700 | ||||||
| Other General and Administrative | 5,287 | 7,381 | ||||||
| Transfer Agent Fees | 4,591 | 5,532 | ||||||
| Depreciation Expense | 426 | 426 | ||||||
| Total operating expenses | 357,565 | 246,884 | ||||||
| Net loss from discontinued operations | $ | (355,341 | ) | $ | (244,178 | ) | ||
| 30 |
Mining Power Group, Inc.
(Formerly known as Rich Cigars, Inc.)
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and 2016
Cash flow from discontinued operations as of December 31, 2017 are as follows:
| December 31, 2017 | December 31, 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Loss | $ | (355,341 | ) | $ | (244,178 | ) | ||
| Adjustments to reconcile net loss to net cash | ||||||||
| used in operating activities: | ||||||||
| Depreciation and Amortization | 7,226 | 2,126 | ||||||
| Common stock issued for services | 20,000 | 11,250 | ||||||
| Change in assets and liabilities: | ||||||||
| Accounts receivable | 8 | (8 | ) | |||||
| Prepaid expenses | 12,264 | (4,266 | ) | |||||
| Inventory | 13,339 | (10,391 | ) | |||||
| Accounts payable and accrued expenses | (12,991 | ) | 11,583 | |||||
| Net cash used in operating activities | $ | (315,495 | ) | $ | (233,884 | ) | ||
NOTE 5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principals of Consolidation
The accompanying consolidated financial statements of Mining Power Group, Inc. (formerly Rich Cigars, Inc.) and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Management makes estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Actual results could differ from those estimates.
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.
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") on the accrual basis of accounting.
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. The significant accounting policies, estimates and related judgments underlying the Company's consolidated financial statements are summarized below. In applying these policies, management makes subjective judgments that frequently require estimates about matters that are inherently uncertain. Actual results could differ materially from those estimates.
| 31 |
Mining Power Group, Inc.
(Formerly known as Rich Cigars, Inc.)
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and 2016
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 $0 and $4,260 as December 31, 2017 and 2016, respectively.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at invoiced amount and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors which, in management's judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition of accounts receivable, the relationship of the allowance for doubtful accounts to accounts receivable and current economic conditions. Based on a review of these factors, the Company establishes or adjusts the allowance for specific customers and the accounts receivable portfolio as a whole. At December 31, 2017 and 2016, the Company wrote off uncollectible accounts in the amount of $8 and $0, respectively.
Inventory
The Company records inventory at lower of cost or net realizable values which consists of ready for sale cigars and other accessories. Cost is determined using the first-in, first-out method. The Company had a balance in inventory of $0 and $13,338 at December 31, 2017 and 2016, respectively. During the period ended December 31, 2017, the Company wrote off inventory in the amount of $24,625 as it was determined to be obsolete due to the Company’s change in strategic direction.
Property and Equipment
The Company records property and equipment at historical cost, and depreciates these assets using the straight-line depreciation method over the estimated useful lives of the respective assets. Estimated useful lives for major classes of depreciable assets are as follows:
| Asset Class | Estimated Useful Life |
| Furniture, fixtures and office equipment | 5 years |
| Computer hardware and software | 3 years |
Expenditures for additions and improvements over $1,500 that substantially extend the useful life of property and equipment or increase its operating effectiveness are capitalized. Repair and maintenance costs are expensed as incurred.
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
| 32 |
Mining Power Group, Inc.
(Formerly known as Rich Cigars, Inc.)
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and 2016
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 Securities and Exchange Commission Staff Accounting Bulletin Topic 13, Revenue Recognition and ASC 605-15-25, Revenue Recognition. The Company’s net revenue is principally from the manufacturing and sales of high-quality, hand-rolled, premium cigars. In all cases, revenue is recognized when a sales transaction closes and the product is shipped or picked-up by the customer. For the years ended December 31, 2017 and 2016, the Company recorded revenues related to the sale of cigars in the amount of $4,606 and $4,488, respectively. Additionally, the Company hosts private events and provides the services of a professional cigar roller. As of December 31, 2017 and 2016, the Company recorded revenues for these services in the amount of $0 and $375, respectively.
Cost of Goods Sold
The Company recognizes the direct cost of purchasing products for sale, including freight charges and packaging, as cost of goods sold in the accompanying Income Statement.
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 measured 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
| 33 |
Mining Power Group, Inc.
(Formerly known as Rich Cigars, Inc.)
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and 2016
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.
Shipping and Handling Costs
Shipping and handling costs to transport goods to customers are primarily paid directly by the customer.
Advertising and Promotion
The Company expenses advertising and promotion costs as incurred. The Company did not incur any advertising and promotion expenses during the years ended December 31, 2017 and 2016, respectively.
Earnings Per Share
The Company has adopted ASC 260-10-50, Earnings per Share, which provides for the calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Basic and diluted losses per share were the same at the reporting dates as no common stock equivalents were issued or outstanding during the years ended December 31, 2017 and 2016. Dilutive securities excluded from the loss per share were Series A preferred shares convertible into 1,000,000,000 shares of common stock and convertible debt convertible into 18,988,836 shares of common stock at December 31, 2017
NOTE 6 CONVERTIBLE NOTES PAYABLE
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. On March 27, 2017, the Company entered into a potentially dilutive convertible advance with Crown Bridge Partners, LLC. The advance, with a face value of $75,000, bears interest at 8% per annum and is 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 as of December 31, 2017 at $1,679,176 using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 86 day term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%. The value of the conversion feature was assigned to the derivative liability and created a debt
| 34 |
Mining Power Group, Inc.
(Formerly known as Rich Cigars, Inc.)
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and 2016
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 $3,086 and $0 at December 31, 2017 and 2016, respectively, and is included in accrued interest on the Balance Sheets.
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 as of December 31, 2017 at $1,188,270 using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 83 day term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%. 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 947,100 shares issued for 15,800 in principal and $645 in accrued interest. Accrued interest related to this advance was $3,608 and $0 at December 31, 2017 and 2016, respectively, and is included in accrued interest on the Balance Sheets.
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 as of December 31, 2017 at $553,851 using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 150 day term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%. 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. Accrued interest related to this advance was $2,610 and $0 at December 31, 2017 and 2016, respectively, and is included in accrued interest on the Balance Sheets.
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
| 35 |
Mining Power Group, Inc.
(Formerly known as Rich Cigars, Inc.)
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and 2016
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 as of December 31, 2017 at $680,625 using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 135 day term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%. 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 $1,890 and $0 at December 31, 2017 and 2016, respectively, and is included in accrued interest on the Balance Sheets.
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 as of December 31, 2017 at $353,071 using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 192 day term to maturity, risk free interest rate of 1.76% and annualized volatility of 63.54%. 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. At December 31, 2017 and 2016, the convertible note was recorded at $963 and $0, respectively. Accrued interest related to this advance was $875 net of discounts of $27,125, and $0 at December 31, 2017 and 2016, respectively, and is included in accrued interest on the Balance Sheets.
At December 31, 2017 and 2016, the convertible notes payable were recorded at $30,040 and $0, net of discounts of $190,634 and $0, respectively.
NOTE 7 PROPERTY AND EQUIPMENT
Property and Equipment consists of the following:
| December 31, 2017 | December 31, 2016 | |||||||
| Furniture and Equipment | $ | 2,131 | $ | 2,131 | ||||
| Less Accumulated Depreciation | (1,633 | ) | (1,207 | ) | ||||
| Property and Equipment, net | $ | 498 | $ | 924 | ||||
For the years ended December 31, 2017 and 2016, the Company recorded Depreciation Expense of $426 and $426.
| 36 |
Mining Power Group, Inc.
(Formerly known as Rich Cigars, Inc.)
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and 2016
NOTE 8 INTANGIBLE ASSETS
Intangible Assets consists of the following:
| December 31, 2016 | December 31, 2016 | |||||||
| Website Development Costs | $ | 8,500 | $ | 8,500 | ||||
| Less Accumulated Amortization | (8,500 | ) | (1,700 | ) | ||||
| Intangible Assets, net | $ | — | $ | 6,800 | ||||
In May 2014, the Company issued 85,000 shares for the development of the Company’s website, which is currently recorded in Website Development Costs. The website for the Company went live on January 1, 2016, and as a result the Company began depreciating the asset at that time. As of December 31, 2017, the Website is no longer being used by the Company, and as a result, is considered to be impaired. As a result, the Company fully amortized the asset. For the years ended December 31, 2017 and 2016, the Company recorded Amortization expense of $6,800 and $1,700, respectively.
NOTE 9 EQUITY
On January 1, 2017, the Company issued 100,000 shares of common stock valued at $10,000. The shares were issued to pay for consulting services performed for the Company. On July 23, 2017, the Company issued 100,000 shares of common stock valued at $10,000. The shares were issued to pay for consulting services performed for the Company.
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.
In December 2017, the Company repurchased 1,285,000 shares of the Company's outstanding common shares for $71,670. The shares have been cancelled and removed from the Company's reported Common Stock on the Balance Sheets.
During the year ended December 31, 2017, the conversion options of the debt were exercised. 2,387,789 shares of the Company’s common stock was issued for $32,827 in principal and $2,757 in accrued interest. Refer to Note 5.
During the period ended December 31, 2017, the Company’s shareholders have contributed $65,405 in the business to be used in the Company’s regular activities. During the period, $25,000 was returned to the CEO. Since inception, the Company’s shareholders have contributed $360,796 in the business to be used in the Company’s regular activities. As of December 31, 2017, the Company has used these proceeds on the Company’s operations and purchases.
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Mining Power Group, Inc.
(Formerly known as Rich Cigars, Inc.)
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and 2016
NOTE 10 TAXES
The components of deferred taxes are as follows:
| December 31, 2017 | December 31, 2016 | |||||||
| Deferred income tax assets: | ||||||||
| Operating loss carryforwards | $ | (228,702 | ) | $ | (128,166 | ) | ||
| Less: Valuation allowance | 228,702 | 128,166 | ||||||
| $ | — | $ | — | |||||
The components of income tax benefit for the periods ended are as follows:
| December 31, 2017 | December 31, 2016 | |||||||
| Current tax benefit | $ | (102,260 | ) | $ | (56,080 | ) | ||
| Change in valuation allowance | 102,260 | 56,080 | ||||||
| Income tax provision | $ | — | $ | — | ||||
At December 31, 2017 and 2016, a valuation allowance was established for the entire amount of the net deferred tax asset as the realization of the deferred tax asset is dependent on future taxable income. The Company calculates the valuation allowance using a Federal Income rate of 21% and a State Income rate of 3.6%.
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. As of December 31, 2017, the Company has not completed the accounting for the tax effects of enactment of the Act; however, as described below, it has made a reasonable estimate of the effects on existing deferred tax balances. These amounts are provisional and subject to change. The Act also includes a requirement to pay a one-time transition tax on the cumulative value of earnings and profits that were previously not repatriated for U.S. income tax purposes. The Company has not made sufficient progress on the transition tax analysis to reasonably estimate the effects, and therefore, has not recorded provisional amounts. However, based on analysis to date the one-time transition tax is not expected to be material. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.
At December 31, 2017, the Company had net operating loss carryforwards for tax purposes of $929,682 which will expire beginning in 2033, if not previously utilized. The Company is subject to taxation in the United States and various state jurisdictions. As of December 31, 2017, the Company’s tax years for 2014, 2015, and 2016 are subject to examination by the tax authorities. With few exceptions, as of December 31, 2017, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years before 2013. Tax year 2014 was open as of December 31, 2017.
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Mining Power Group, Inc.
(Formerly known as Rich Cigars, Inc.)
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and 2016
NOTE 11 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 December 31, 2017, the Company is not aware of any contingent liabilities that should be reflected in the accompanying consolidated financial statements.
NOTE 12 SUBSEQUENT EVENTS
The Company has evaluated subsequent events that occurred through the date of the filing of the Company’s fiscal year 2017 Form 10-K.
Effective 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”). As a result, the Company assumed the responsibility for the development of “Simple Cork™” a new, multi-nationally patented combination wine bottle cork/opener (www.simplecork.com), which represents a faster and easier way to get a cork out of a bottle of wine without the use of a corkscrew (The “Purchase”). The Company is forming a subsidiary specifically to hold the assets purchased and to develop the Simple Cork™.
Prior to the closing of the Asset Purchase, which includes the French patent awarded in 2017 and patents pending in eight other countries including the United States, the Company on November 29, 2017 had obtained a copy of an independent CPA appraisal using the “relief-from-royalty method” of the estimated “fair value” of the intellectual property (“IP”) once in market. (The “Appraisal”) The valuation used in the Appraisal was performed in conformity with the “Statement of Standards for Valuation Services No. 1” of the American Institute of Certified Public Accountants (“AICPA”). The standard of value used was” fair value”, which per the Financial Accounting Standards Boards (“FASB”) is defined as “the price that would be received to sell as asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” AICPA also finds the definition of “fair market value” in Revenue Ruling 59-60 consistent with the definition of “fair value” as defined by FASB.
On February 7, 2017, the Company issued an 8-K on the Asset Purchase which contained, and to which was appended, additional information pertaining to the Appraisal and the Asset Purchase.
The Company is forming subsidiaries to invest in (1) the development and multinational marketing of the proprietary patent-protected Simple Cork™, and (2) the development of a unique cryptocurrency mining business for Bitcoin and other cryptocurrencies which will operate on a 24/7 basis
On February 22, 2018, the Company cancelled and unwound the corporate reorganization as published on form 8-K and filed with the Securities and Exchange Commission (“SEC”) on December 26, 2017, and filed amended and restated Articles of Incorporation with Colorado, wherein the total quantity of authorized shares of common stock of the Company is reduced to one hundred million (100,000,000) shares and the total quantity of authorized shares of preferred stock, designated in three series, is eleven million (11,000,000) shares.
On February 8, 2017, the Company converted 37,000 shares of its convertible preferred stock into 37,000,000 shares of restricted common stock.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On December 19, 2017, the Company received a letter from Pritchett, Siler & Hardy, P.C. (“PSH”) resigning as the Company's independent registered public accounting firm due to their acquisition on December 12, 2017, by Haynie & Company CPAs
The audit reports of PSH on the consolidated financial statements of the Company for each of the two most recent fiscal years ended December 31, 2015 and December 31, 2016 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, other than as such concerns pertain the Company remaining a going concern.
During the Company's two most recent fiscal years ended December 31, 2015 and December 31, 2016 and during the subsequent interim period from January 1, 2016 through December 19, 2017, (i) there were no disagreements with PSH on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures that, if not resolved to PSH's satisfaction, would have caused PSH to make reference to the subject matter of the disagreement in connection with its reports and (ii) there were no “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K.
On December 19, 2017, the Board of Directors of the Company engaged Haynie & Company CPAs (“Haynie”), the successor firm to PSH, as the Company's independent registered public accounting firm for the year ending December 31, 2017.
ITEM 9A. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS & 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.
In connection with this annual report, as required by Rule 15d-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. Under the supervision of our Board of Directors, our Chief Executive Officer acting as our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2017 based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control - Integrated Framework (2013), our management concluded that our internal control over financial reporting was not effective as of December 31, 2017. Subject to the inherent limitations noted in this Part II, Item 9A(T) as of December 31, 2017, our disclosure controls and procedures were not effective due to the existence of material weaknesses in our internal controls over financial reporting as discussed below. It is management’s responsibility to establish and maintain adequate internal control over financial reporting. We intend to expand our procedures and controls for the current fiscal year.
This annual report does not include an attestation report of our independent registered public accounting firm regarding our internal control over financial reporting. Management’s report on internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC because we are neither an accelerated filer nor a larger accelerated filer.
We have implemented a framework used by management to evaluate the effectiveness of our internal control over financial reporting, which incorporates a quarterly review by our Board of Directors of the recording of transactions and whether questions of accuracy and authorization may arise as the accounting may be reviewed by our auditors.
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Our Management’s assessment of the effectiveness of internal controls over financial reporting as of the end of the most recent fiscal year, including a statement as to whether or not internal control over financial reporting is effective is contained in the section immediately following this paragraph.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
| (i) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; | |
| (ii) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and | |
| (iii) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements. |
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management’s assessment of the effectiveness of the small business issuer’s internal control over financial reporting is as of the year ended December 31, 2017. We believe that internal control over financial reporting is not effective because of a lack of segregation of duties and because of the lack of a dedicated Chief Financial Officer. We have not identified any current material weaknesses considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Attestation Report of the Registered Public Accounting Firm.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the small business issuer's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The officers are elected by the board of directors at the first meeting after each annual meeting of our shareholders and hold office until their successors are duly elected and qualified under the Company’s bylaws.
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. Directors receive no compensation for serving on the board of directors other than the reimbursement of reasonable expenses incurred in attending meetings. Officers are appointed by the board of directors and serve at the discretion of the board.
There are no other persons nominated or chosen to become directors or executive officers, nor do we have any employees other than above mentioned officers and directors. Currently, we do not have an employment agreement in place with our officers and directors, past or present, who have acted as consultants under oral agreements.
We do not, at present, have any employees other than the current officers and directors. We have not entered into any employment agreements, as we currently do not have any employees other than the current officer and director.
The following table sets forth the names and ages of officers and directors as of December 31, 2017. Our executive officers are elected annually by our Board of Directors. Our executive officers hold their offices until they resign, are removed by the Board, or his successor is elected and qualified.
Departure of Officers and Directors
As a result of the change of control of the Company as reported on form 8-K filed with the SEC on November 27, 2017, effective 10 days following the mailing of the notice to shareholders on Schedule 14f-1 which occurred on December 11, 2017, Al Rushing resigned as Vice President, Chief Operating Officer, Secretary, and a Director of the Company and Michael Rushing resigned as Vice President of Sales and a Director of the Company. Neither resignation of Al and Michael Rushing was the result of any disagreement with the policies, practices or procedures of the Company.
Reginald Saunders had previously resigned as an officer and director of the Company on April 14, 2017. His resignation was not the result of any disagreement with the policies, practices or procedures of the Company.
Identification of Directors and Executive Officers
As of the date of this report, the Company has only one Officer and Director.
| Name | Age | Term Served | Title | |||
| Richard Davis | 34 | Since Inception | Chief Executive Officer, President, Secretary and Treasurer, Director |
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Officer and Director Biographical Information:
Richard Davis, President and Director
Richard Davis, age 34, attended University of North Carolina from 2001 – 2005, where he studied Business Administration and Marketing. Richard Davis has been President and Director of MainStreet Ventures from 2009 – 2014. Richard Davis formerly controlled RichKeys Enterprises, LLC from November 2012 until September 2014. Richard Davis has worked since 2014 as a financial consultant. Richard Davis’ experience in business and marketing qualifies him for the position with our company. Richard Davis will spend approximately 40 hours per week on our company’s business.
Committees of the Board of Directors
We do not have any committees managed under the direction of our board of directors.
EXECUTIVE COMMITTEE
We do not have an executive committee, at this time.
AUDIT COMMITTEE
We do not have an audit committee at this time.
Conflicts of Interest – General
Our directors and officers are, or may become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety of businesses. Thus, there exist potential conflicts of interest including, among other things, time, efforts and corporation opportunity, involved in participation with such other business entities. Each officer and director of our business is engaged in business activities outside of our business. The amount of time Richard Davis devotes to our business is less than 40 hours per week.
CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES
Presently no requirement contained in our Articles of Incorporation, Bylaws, or minutes which requires officers and directors to disclose to our business opportunities which come to their attention. Our officers and directors do, however, have a fiduciary duty of loyalty us to disclose to it any business opportunities which come to their attention, in their capacity as an officer and/or director or otherwise. Excluded from this duty would be opportunities which the person learns about through his involvement as an officer and director of another company. We have no intention of merging with or acquiring an affiliate, associate person or business opportunity from any affiliate or any client of any such person, at this time.
Involvement in Legal Proceedings
No executive Officer or Director of our Company has been convicted in any criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding that is currently pending.
No executive Officer or Director of our Company is the subject of any pending legal proceedings.
No Executive Officer or Director of our Company is involved in any bankruptcy petition by or against any business in which they are a general partner or executive officer at this time or within two years of any involvement as a general partner, executive officer, or Director of any business.
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ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid to officers during the fiscal years ended December 31, 2017, 2016 and 2015. The table sets forth this information for the Company including salary, bonus, and certain other compensation to the named executive officers for the past three fiscal years.
| Name & Position | Year | Contract Payments ($) | Bonus ($) | Stock awards (1) (2)(3)(4) | Option awards ($) | Non-equity incentive plan compensation ($) | Non-qualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | |||||||||||||||||||||||||||
| Richard Davis, President/CEO, Director | 2015 | 0 | 0 | (37,500 | ) | 0 | 0 | 0 | $ | 2,678 | $ | (1,072 | ) | |||||||||||||||||||||||
| 2016 | 0 | 0 | 0 | 0 | 0 | 0 | 91,896 | $ | 91,896 | |||||||||||||||||||||||||||
| 2017 | 0 | 0 | 0 | 0 | 0 | 0 | 75,520 | $ | 75,520 | |||||||||||||||||||||||||||
| Alfred Rushing, COO, V.P., Secretary & Director* | 2015 | 0 | 0 | (37,500 | ) | 0 | 0 | 0 | 0 | $ | (3,750 | ) | ||||||||||||||||||||||||
| 2016 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ | 0 | |||||||||||||||||||||||||||
| 2017 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ | 0 | |||||||||||||||||||||||||||
| Michael Rushing, V.P. of Sales & Director* | 2015 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ | 0 | ||||||||||||||||||||||||||
| 2016 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ | 0 | |||||||||||||||||||||||||||
| 2017 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ | 0 | |||||||||||||||||||||||||||
| Reginald Saunders, S.V.P. of Marketing and Entertainment & Director* | 2015 | 7,500 (4) | 0 | 75,000 | 0 | 0 | 0 | 0 | $ | 7,500 | ||||||||||||||||||||||||||
| 2016 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ | 0 | |||||||||||||||||||||||||||
| 2017 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ | 0 | |||||||||||||||||||||||||||
*Former officer and director.
| (1) | Accrued consulting |
| (2) | In exchange for accruals |
| (3) | @ $0.10 per share |
| (4) | Reginald Saunders was issued 75,000 shares of common stock, pursuant to his Marketing Services Agreement dated August 18, 2015. The shares were reallocated from Alfred Rushing and Richard Davis. |
There are no current employment agreements between our Company and our executive officers or directors, other than the consulting agreement with Reginald Saunders, a former director during his time of service. Our executive officers and directors have agreed to work with minimal remuneration on a month-to-month consulting fee basis at $50 per hour. Our executive officers and directors have the responsibility of determining the timing of remuneration programs for key personnel based upon such factors as positive cash flow, shares sales, product sales, estimated cash expenditures, accounts receivable, accounts payable, notes payable, and a cash balances. At this time, management cannot accurately estimate when sufficient revenues will occur to implement this compensation, or the exact amount
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of compensation. A total of $75,520 was expensed in the year ended December 31, 2017 for Officers Compensation.
There are no annuity, pension or retirement benefits proposed to be paid to officers, directors or employees of the corporation in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by our Company.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
None.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
None.
CONSULTING AGREEMENTS WITH OFFICERS AND DIRECTORS
During 2017, we had an arrangement to pay consulting fees for services to the following officers/directors:
Richard Davis, CEO and Director: $50 per hour
Alfred Rushing, COO and Director: $50 per hour
Michael Rushing, Director: $50 per hour
Reginald Saunders, Director: contractual arrangement for shares of the Company’s Common Stock for marketing consulting (and not as a Director).
DIRECTOR COMPENSATION
Our Directors are permitted to receive fixed fees and other compensation for their services as directors. Our Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.
The following table sets forth the compensation paid to officers and board members during the fiscal years ended December 31, 2017, 2016 and 2015. The table sets forth this information for our Company including salary, bonus, and certain other compensation to the Board members and named executive officers for the past three fiscal years.
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
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| Name | Fees earned or paid in cash ($) | Stock awards ($) | Option awards ($) | Non-equity incentive plan compensation ($) | Non-qualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | |||||||||||||||||||||||
Richard Davis(1) 2015 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
| 2016 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
| 2017 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
Alfred Rushing(1) 2015 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
| 2016 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
| 2017 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
Michael Rushing (1) 2015 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
| 2016 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
| 2017 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
Reginald Saunders (1)(2) 2015 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
| 2016 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
| 2017 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
| Totals | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||||||||||
| (1) | Messrs. Davis, Rushing, Rushing, and Saunders received shares as compensation for services as officers as shown on the Officers Compensation Table, but none for services as directors. |
| (2) | Reginald Saunders was appointed as an Officer and Director on October 1, 2015 and resigned April 14, 2017. |
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our officers and directors are indemnified as provided by the Florida Revised Statutes and the bylaws.
Our directors and officers are indemnified as provided by the Florida corporate law and our Bylaws. We have agreed to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities Act of 1933. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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We have been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction. We will then be governed by the court’s decision.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information with respect to the beneficial ownership of our common shares as it relates to our named directors and executive officers, and each person known to us to be the beneficial owner of more than five percent (5%) of said securities, and all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock and options, warrants and convertible securities that are currently exercisable or convertible within 60 days of the date of this document into shares of our common stock are deemed to be outstanding and to be beneficially owned by the person holding the options, warrants or convertible securities for the purpose of computing the percentage ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
The information below is based on the number of shares of our preferred and common stock that we believe was beneficially owned by each person or entity as of December 31, 2017.
| Title of Class | Name of Beneficial Owner (1) | Amount and Nature of Beneficial Owner | Percent of Class (2) | |||||||||
| Common shares | Richard Davis, President, Chief Executive Officer & Director | -0- | -0- | |||||||||
| Common shares | Alfred Rushing, COO, Vice President, Secretary & Director | -0- | -0- | |||||||||
| Common shares | Michael Rushing, Vice President of Sales & Director | -0- | -0- | |||||||||
| Common shares | William Hicks, Jr. | 250,000 | 6.94 | % | ||||||||
| Preferred shares | Dror Svorai | 125,000 | 100.0 | % | ||||||||
| Common shares | All Directors and Executive Officers as a Group | -0- | -0- | |||||||||
| (1) | *The address of each person listed above, unless otherwise indicated, is c/o 5100 SW 103rd Street, Ocala, FL 34476. |
| (2) | Based upon 3,915,769 shares issued and outstanding as of December 31, 2017 on a fully diluted basis. |
Rule 13d-3 under the Securities Exchange Act of 1934 governs the determination of beneficial ownership of securities. That rule provides that a beneficial owner of a security includes any person who directly or indirectly has or shares voting power and/or investment power with respect to such security. Rule 13d-3 also provides that a beneficial owner of a security includes any person who has the right to acquire beneficial ownership of such security within sixty days, including through the exercise of any option, warrant or conversion of a security. Any securities not outstanding which are subject to such options, warrants or conversion privileges are deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such person. Those securities are not deemed to be outstanding for the purpose of computing the percentage of the class owned by any other person.
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
There were no grants of stock options since inception to December 31, 2017. We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.
Our Board of Directors have not adopted a stock option plan. We have no plans to adopt one but may choose to do so in the future. If such a plan is adopted, this may be administered by the board or a committee appointed by the board (the “Committee”). The committee would have the power to modify, extend or renew outstanding options and to authorize the grant of new options in substitution therefore, provided that any such action may not impair any rights under any option previously granted. We may develop an incentive based stock option plan for our officers and directors and may reserve up to 10% of its outstanding shares of common stock for that purpose.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Other than the stock transactions discussed below, we have not entered into any transaction nor is there any proposed transactions in which any of the founders, directors, executive officers, shareholders or any members of the immediate family of any of the foregoing had or is to have a direct or indirect material interest.
CONSULTING AGREEMENTS WITH OFFICERS AND DIRECTORS
Reginald Saunders, a former director of the Company, had been compensated with 75,000 shares of common stock in return for his consulting services. Copies of the consulting agreement can be found in our Amendment 1 to the S-1 filing dated March 31, 2016 found at www.sec.gov.
Other than described above, we have no formal written employment agreement or other contracts with our current officers and there is no assurance that the services to be provided by them will be available for any specific length of time in the future. The amounts of compensation and other terms of any full-time employment arrangements would be determined, if and when, such arrangements become necessary.
EQUITY ISSUANCES TO OFFICERS AND DIRECTORS
There were no equity issuances to our officers and/or directors for the year ended December 31, 2017.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
During the fiscal year ended December 31, 2017 we incurred approximately $14,200 in audit fees to our principal independent accountants, Haynie & Company, for professional services rendered in connection with the audit of consolidated financial statements for the fiscal year ended December 31, 2017 and review of the consolidated financial statements included in our quarterly reports on Form 10-Q. During the fiscal year ended December 31, 2016 we incurred approximately $12,000 in audit fees to our principal independent accountants, Pritchett, Siler & Hardy P.C., for professional services rendered in connection with the audit of consolidated financial statements for the fiscal year ended December 31, 2016 and review of the consolidated financial statements included in our quarterly reports on Form 10-Q.
During the fiscal years ended December 31, 2017 and 2016, we did not incur any other fees for professional services rendered by our principal independent accountants for all other non-audit services which may include, but not limited to, tax related services, actuarial services or valuation services.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
The following exhibits are incorporated into this Form 10-K Annual Report:
| Exhibit No. | Description | |
| 31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a–14(a) or 15d-14(a) of the Securities Exchange Act of 1934 | |
| 31.1 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 | |
| 32.1 | Certification of Chief Executive Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification of Chief Financial Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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Pursuant to the requirements of Section 13 or 15(d) 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. | ||
| Dated: April 24, 2018 | By: | /s/ Richard Davis |
| Richard Davis | ||
| CEO and Director | ||
|
Principal Executive Officer Principal Financial Officer Principal Accounting Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Dated: April 24, 2018 |
DIRECTORS
/s/ Richard Davis
_____________________________________
Richard Davis, Director, Chief Executive Officer,
Principal Financial Officer, Principal Accounting Officer
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