(Name, address, including zip code, and telephone number, including area code, of agent for service)
Gregg E. Jaclin, Esq.
Tel. No.: (609) 275-0400
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
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If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
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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.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the commission, acting pursuant to said section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission (the “SEC”) is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
This summary highlights selected information contained elsewhere in this Prospectus. This summary does not contain all the information that you should consider before investing in the Common Stock of Lingerie Fighting Championships, Inc. (referred to herein as the “Company,” “we,” “our,” and “us”). You should carefully read the entire Prospectus, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the accompanying financial statements and notes before making an investment decision.
Business Overview
We were incorporated in Nevada on November 29, 2006 under the name Sparking Events, Inc., and on September 16, 2013 our corporate name was changed to Cala Energy Corp., (formally, Xodtec LED, Inc.) under which we were engaged in the business of offering services, such as enhanced oil recovery and material supplies, to gas and oil fields predominantly located in Southeast Asia. We were not successful in our efforts and discontinued this line of business. Since that time, and prior to the “Exchange Agreement” (defined below) we have been a "shell company", as such term is defined in Rule 12b-2 of the Exchange Act.
On March 31, 2015, the Company, pursuant to share exchange agreement (the "Share Exchange Agreement"), among the Company, Lingerie Fighting Championships, Inc. (“LFC”), and the holders of all of the outstanding common stock and convertible notes of LFC exchanged their common stock and convertible notes of LFC for a total of 16,750,000 shares of common stock, which represented 84.70% of the Company's common stock after giving effect to the issuance of the shares pursuant to the Share Exchange Agreement and the shares of common stock issued in the private placement described in the following paragraph. The issuance of the 16,750,000 shares of common stock to the former holders of LFC's common stock and convertible notes in exchange for the capital stock of LFC is referred to as the reverse acquisition transaction. The sole director and chief executive officer of LFC became a director and the chief executive officer of the Company. As a result of the reverse acquisition, the Company's business has become the business of LFC.
On March 31, 2015, contemporaneously with the closing pursuant to the Share Exchange Agreement, the Company issued 2,500,000 shares of common stock for a purchase price of $0.08 per share, for a total of $200,000. The proceeds from the private placement were held in escrow on March 31, 2015, and were paid to the Company on April 2, 2015. Accordingly, on March 31, 2015, the proceeds from the private placement are reflected as a subscription receivable. None of the purchasers in the private placement are affiliates of the Company.
As a result of the reverse acquisition with LFC, we ceased to be a shell company on March 31, 2015.
Effective as of April 1, 2015, we changed our name to "Lingerie Fighting Championships, Inc." a name which more accurately represents our new business. We effected the name change by virtue of a short form merger, pursuant to which LFC (our wholly owned subsidiary after the LFC Acquisition) merged with and into the Company, with the Company remaining as the surviving parent corporation. In connection with the name change, we submitted to FINRA a voluntary request for the change of our OTC trading symbol. Our Common Stock now trades under the symbol “BOTY”.
As a result of, and in connection with, the reverse acquisition, the Company changed its fiscal year to December 31, which was LFC's fiscal year, from a fiscal year ending February 28.
On April 20, 2015, the Company effected a one-for-800 reverse split, pursuant to which each share of common stock was converted into, and became 1/800 of a share of common stock, with fractional shares being rounded up to the next higher whole number of shares. As a result of the reverse split, the 339,757,357 shares of common stock, then outstanding, became and were converted into 424,977 shares. All references to shares of common stock and per share information retroactively reflect the reverse split.
Investment Agreement with Tangiers Global LLC
On April 4, 2016, we closed on an Investment Agreement with Tangiers Global, LLC (“Tangiers”), a Wyoming limited liability company. Pursuant to the terms of the Investment Agreement, Tangiers committed to purchase up to $5,000,000 of our Common Stock during the Open Period. From time to time during the Open Period, the Company may deliver a drawdown notice to Tangiers which states the dollar amount that we intend to sell to Tangiers on a date specified in the put notice (the “Put Notice”). The maximum investment amount per notice shall be shall be equal to one hundred percent (100%) of the average of the daily trading dollar volume (U.S. market only) of the Common Stock for the ten (10) consecutive Trading Days immediately prior to the applicable Put Notice Date so long as such amount does not exceed an accumulative amount per month of $100,000 unless a prior approval of the Investor is obtained by the Company. The total purchase price to be paid, in connection to the Put Notice, by Tangiers shall be calculated at a eighteen percent (18%) discount of the lowest trading price of the Common Stock during the five (5) consecutive Trading Days immediately succeeding the applicable Put Notice Date.
In connection with the Investment Agreement, we also entered into a registration rights agreement (the “Registration Rights Agreement”) with Tangiers, pursuant to which we are obligated to file a registration statement with the SEC. We are obligated to use all commercially reasonable efforts to maintain an effective registration statement until termination of the Investment Agreement.
The Company signed a promissory note to pay to the order of Tangiers the Principal Sum of $100,000 as a Commitment fee. The promissory note maturity date is eight (8) months from April 4, 2016. In the event the S-1 related to the Equity Investment Agreement goes effective within 180 days of the April 4, 2016, 2016, the Maturity Date of this Note will be extended to ten (10) months.
If this registration statement is declared effective within 90 days of the execution date of the Investment Agreement, the Company and Holder agree the principal balance of the Note will immediately be reduced by $40,000.
At the election of Tangiers and upon written notice from Tangiers, at each Closing Date (as defined in the Investment Agreement) after the date which is six (6) months after the Effective Date, Holder shall retain (or the Company shall pay to Holder) an amount equal to ten percent (10%) of each Put Amount (as defined in the Investment Agreement), and the amounts shall be applied by Holder as follows: first against the amount of any unpaid interest or other fees, and second against any unpaid Principal Sum, until such time as all amounts of interest, fees and Principal sum have been paid by the Company.
The 3,500,000 shares to be registered herein represents 17.70 % of the total issued and outstanding shares, assuming that the selling stockholder will sell all of the shares offered for sale.
There are substantial risks to investors as a result of the issuance of shares of our Common Stock under the Investment Agreement. These risks include dilution of stockholders’ percentage ownership, significant decline in our stock price and our inability to draw sufficient funds when needed.
Tangiers will periodically purchase our Common Stock under the Investment Agreement and will, in turn, sell such shares to investors in the market at the market price. This may cause our stock price to decline, which will require us to issue increasing numbers of common shares to Tangiers to raise the same amount of funds, as our stock price declines.
The aggregate investment amount of $5,000,000 was determined based on numerous factors, including the following:
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Current financial operating needs
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Financing of workover projects
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Acquisition of assets, business and/or operations
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Acquisition of additional licensing
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Other purposes that the Board in its good faith deem in the best interest of the Company
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Where You Can Find Us
We do not have a principal office. Our mailing address is 6955 North Durango, Suite 1115-129, Las Vegas, NV, 89149, telephone (702) 527-2942. Our website is www.lingeriefc.com.
You should carefully consider the risks described below together with all of the other information included in this Prospectus before making an investment decision with regard to our securities. The statements contained in or incorporated into this Prospectus that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to Our Business
Since our auditor has issued a going concern opinion regarding our company, there is an increased risk associated with an investment in our company.
We have earned limited revenue since our inception, which makes it difficult to evaluate whether we will operate profitably. Our future is dependent upon our ability to obtain financing or upon future profitable operations. We reserve the right to seek additional funds through private placements of our common stock and/or through debt financing. Our ability to raise additional financing is unknown. We do not have any formal commitments or arrangements for the advancement or loan of funds. For these reasons, our auditors stated in their report that they have substantial doubt we will be able to continue as a going concern. As a result, there is an increased risk that you could lose the entire amount of your investment in our company.
We have a limited operating history upon which investors can evaluate our future prospects. We may never attain profitability.
Historically, we have been a shell company with no operating history and no assets other than cash. Upon consummation of the LFC Acquisition, we redirected our business focus towards the development and commercialization of building an integrated media and entertainment company, to be engaged in the development, production and promotion of television programming, pay-per-view programming and live events. LFC was incorporated in 2014 and both the Company and LFC have limited operating histories upon which an evaluation of our business plan or performance and prospects can be made.
To date there has only been one LFC event prior to the founding of LFC, along with various YouTube® promotional videos. Our events are directly targeted to mature audiences with an interest in sophisticated contact sports such as MMA, Muay Thai and boxing, but that are also looking for entertainment, athleticism, comedy, parody, drama and satire. Our proposed operations are therefore subject to all of the risks inherent in light of the expenses, difficulties, complications and delays frequently encountered in connection with the formation of any new business, the development of live events, as well as those risks that are specific to our proposed business in particular. The risks include, but are not limited to, the possibility that we will not be able to develop or properly promote our live events. To successfully introduce and market our live events at a profit, we must establish brand name recognition and competition for fun and excitement for our live events. There are no assurances that the Company can successfully address these challenges. We are also dependent on raising substantial additional capital to attain these goals. If it is unsuccessful, the Company and its business, financial condition and operating results will be materially and adversely affected.
Given the limited operating history, management has little basis on which to forecast future market acceptance of our LFC live events. It is difficult to accurately forecast future revenues because the business of the Company is new and its market has not been fully identified or developed. If our events do not gain in popularity, the business, operating results and financial condition of the Company will be materially and adversely affected. Moreover, the Company may be unable to adjust its spending in a timely manner to compensate for any unanticipated reduction in revenue. As a result, any significant reduction in revenues would immediately and adversely affect the business, financial condition and operating results of the Company.
Our failure to manage growth, diversification and changes to our business could harm our business.
Our company currently has no revenue or material market following. The failure to successfully manage and monetize any growth, and to successfully diversify our business in the future could harm the success and longevity of our company.
We may not achieve or sustain profitability in the future.
We have not generated significant revenue since inception. We anticipate that our operating expenses will increase as we continue to invest to grow our business, pay athletes, broker live events, acquire customers and develop our business platform and televised and home video programming. These efforts may prove more expensive than we currently anticipate, and we may not succeed in generating sufficient revenues to offset these higher expenses. If we are unable to do so, the Company and its business, financial condition and operating results could be materially and adversely affected.
We cannot predict our future capital needs and we may not be able to secure additional financing.
At the effective time of the LFC Acquisition, we consummated a closing of the PPO, raising gross proceeds of approximately $200,000 from five accredited investors. We believe that we will have sufficient funds to meet our presently anticipated working capital requirements. This belief is based on our operating plan, which in turn is based on assumptions, which may prove to be incorrect. In addition, we will likely need to raise significant additional funds in order to implement our business plan, market and promote our events, retain talent, support our growth, develop new products and events, respond to competitive pressures, acquire or invest in complementary or competitive businesses or technologies, or take advantage of unanticipated opportunities. We will require financing in addition to the PPO in order to meet our plans for expansion. We cannot be sure that this additional financing, if needed, will be available on acceptable terms or at all. Furthermore, any debt financing, if available may involve restrictive covenants, which may limit our operating flexibility with respect to business matters. If additional funds are raised through the issuance of equity securities, the percentage ownership of our existing shareholders will be reduced, our shareholders may experience additional dilution in net book value, and such equity securities may have rights, preferences, or privileges senior to those of our existing shareholders. If adequate funds are not available on acceptable terms, or at all, we may be unable to develop or enhance our products and services, take advantage of future opportunities, repay debt obligations as they become due, or respond to competitive pressures, any of which would have a material adverse effect on our business, prospects, financial condition, and results of operations.
The failure to create popular live events and televised programming from time to time could adversely impact our business.
The creation, marketing and distribution of our live and televised entertainment, including our anticipated pay-per-view events, is the core of our business and is critical to our ability to developing a fan base and generate revenues. A failure to identify, acquire and maintain a target audience and following would materially adversely affect us. A failure to develop creative and entertaining video programming and live events would likely lead to a decline in the popularity of our brand of entertainment and would adversely affect our ability to generate revenues and could have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock.
The loss of the creative services of Shaun Donnelly could adversely impact our business.
For the foreseeable future, we will heavily depend on the vision and services of Shaun Donnelly, who was LFC's primary founder and developer. In addition to serving as a key member of our management and production team, Shaun Donnelly leads our creative team that develops the story lines and the characters for our televised programming and our live events. The loss of Shaun Donnelly due to retirement, disability or death will have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock. We do not carry key man life insurance on Shaun Donnelly.
The failure to develop television, digital home video and video-on-demand programming could adversely impact our business.
If and as our revenues are to be generated, directly and indirectly, from the distribution of televised programming, digital home video programming or video-on-demand programming of which any failure to develop any of these arrangements with the distributors for our programs could have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock. To date we have created and designed only one DVD featuring LFC's original mature audience content, and have posted various YouTube® videos on our YouTube® channels.
Our insurance may not be adequate.
Our live event schedule will expose our performers and our employees who are involved in the production of those events to the risk of travel and performance-related accidents, the consequences of which may not be fully covered by insurance. Although we have general liability insurance and umbrella insurance policies, and although our performers are responsible for obtaining their own health, disability and life insurance, we cannot assure you that the consequences of any accident or injury will be fully covered by insurance. Our liability resulting from any accident or injury not covered by our insurance could have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock.
We will face a variety of risks if we expand into new or complementary businesses in the future.
Our core operations have consisted of the initial development, promotion and distribution of our live and televised entertainment and our branded merchandise. Currently, there has only been one LFC live event. Our current strategic objectives include not only further developing and enhancing our existing business but also entering into new or complementary businesses, such as merchandising, the creation of new forms of entertainment and brands, the development of new television programming and the development of branded location-based entertainment businesses. The following risks associated with expanding into new or complementary businesses by acquisition, strategic alliance, investment, licensing or other arrangements could have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock:
. potential diversion of management's attention and resources from our existing business and an inability to recruit or develop the necessary management resources to manage new businesses;
. unanticipated liabilities or contingencies from new or complementary businesses or ventures;
. reduced earnings due to increased goodwill amortization, increased interest costs and additional costs related to the integration of acquisitions;
. potential reallocations of resources due to the growing complexity of our business and strategy;
. competition from companies then engaged in the new or complementary businesses that we are entering;
. possible additional regulatory requirements and compliance costs;
. dilution of our stockholders' percentage ownership and/or an increase of our leverage when issuing equity or convertible debt securities or incurring debt; and
. potential unavailability on acceptable terms, or at all, of additional financing necessary for expansion.
If we fail to maintain effective internal controls over financial reporting, we may be subject to litigation and/or costly remediation and the price of our common stock may be adversely affected.
Failure to establish the required internal controls or procedures over financial reporting, or any failure of those controls or procedures once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Upon review of the required internal control over financial reporting and disclosure controls and procedures, our management and/or our auditors may identify material weaknesses and/or significant deficiencies that need to be addressed. Any actual or perceived weaknesses or conditions that need to be addressed in our internal control over financial reporting, disclosure of management's assessment of its internal control over financial reporting or disclosure of our public accounting firm's attestation to or report on management's assessment of our internal control over financial reporting could adversely impact the price of our common stock and may lead to claims against us.
If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork and focus that contribute crucially to our business.
We believe that a critical component of our success will be dependent on a corporate culture that fosters innovation, encourages teamwork, cultivates creativity and promotes focus on execution. We have invested substantial time, energy and resources in building a highly collaborative team that works together effectively in a non-hierarchical environment designed to promote openness, honesty, mutual respect and pursuit of common goals. As we grow, we may find it difficult to maintain these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.
Degradation in our stature and reputation in the market could harm our business.
Our LFC brand names are very important to us, and any degradation in our stature and reputation in the market may adversely affect our business.
Risks Related to Our Industry
The failure to retain or continue to recruit key performers could harm our business.
Our success depends, in large part, upon our ability to recruit, train and retain attractive athletic and entertaining performers who have the physical presence, acting ability and charisma to portray characters in our live events, televised programming and home video programming. Because our LFC events are based on MMA "cage" fighting matches, our LFC members and fighting participants must have some degree of professional MMA and Brazilian Jiu Jitsu training. We cannot assure you that we will be able to continue to identify, train, and retain such performers in the future. Additionally, we cannot assure you that we will be able to retain our current performers. Our financial results depend, in part, on the popularity of our key performers. Our failure to attract and retain performers, or a serious or untimely injury to, or the death of, any of our key performers, could have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock.
We may be prohibited from promoting and conducting our live events if we do not comply with applicable regulations.
In various states in the United States and certain Canadian provinces, athletic commissions and other applicable regulatory agencies may require us to comply with their regulations in order for us to promote and conduct our live events. In the event we are required to comply with such regulation and subsequently fail to comply with such regulations of a particular jurisdiction, we may be prohibited from promoting and conducting our live events in that jurisdiction. The inability to present our live events over an extended period of time or in a number of jurisdictions could have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock. We are not currently regulated by such regulatory agencies but easily could be if rules change or if the LFC business is perceived to be a combat sport.
A decline in general economic conditions or in the popularity of our brand of mature entertainment could adversely impact our business.
Because our operations are affected by general economic conditions and consumer tastes, our future success is unpredictable. The demand for entertainment and leisure activities tends to be highly sensitive to consumers' disposable incomes, and thus a decline in general economic conditions could, in turn, have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock.
Public tastes are unpredictable and subject to change and may be affected by changes in the country's political and social climate. A change in public tastes could have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock.
The entertainment market in which we operate is highly competitive, and we may not be able to compete effectively, especially against competitors with greater financial resources or marketplace presence.
In our entertainment market, we compete on a national basis primarily with the WWE, UFC and the Lingerie Football League, LLC ("LFL"). We compete with WWE, UFC and LFL in particular aspects of our business, including viewership, access to arenas, the sale and licensing of branded merchandise and distribution channels for our televised programs. We also directly compete to find, hire and retain talented performers. WWE, UFC and LFL have substantially greater financial resources than we do and are affiliated with television cable networks on which WWE's and UFC's programs are aired. Other sources of competition in our sports entertainment market are regional promoters of wrestling MMA events. Any significant loss of viewers, venues, distribution channels or performers could have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock.
We compete with premium cable and satellite television networks and channels such as Starz, AMI, PlayboyTV, UKTV and YouToo for audience viewership. We also compete for entertainment and advertising dollars with other entertainment and leisure activities. We face competition from professional sporting events in most cities in which we intend to hold live events and distribute televised programming. We also compete for attendance, broadcast audiences and advertising revenue with a wide range of alternative entertainment and leisure activities. This competition could result in fewer entertainment and advertising dollars spent on our form of entertainment, which could have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock.
Our business could be adversely impacted if we are unable to protect our intellectual property rights.
Our competitive advantage depends in substantial part on our ability to protect any trademarks, service marks, copyrighted material and characters, trade names and other intellectual property rights that we acquire in the course of our business.
Other parties may infringe on our intellectual property rights and may thereby dilute our brand in the marketplace. Any such infringement of our intellectual property rights would also likely result in our commitment of time and resources to protect these rights. Similarly, we may infringe on others' intellectual property rights. One or more adverse judgments with respect to these intellectual property rights could have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock.
Conversely, competitors may also attempt to contest or challenge our ability to utilize one or more marks or slogans. We will be required to expend sum of our capital defending our rights and, may not be successful.
We are dependent on the members of the LFC Cast and development and operations personnel, and the loss of one or more of these employees or consultants could harm our business and prevent us from implementing our business plan in a timely manner.
Our success depends substantially upon the continued services of our at-will independent consultants, constituting members of the LFC Cast and development and operations personnel in charge of assisting in the development of our video and live event productions. From time to time, there may be changes in our LFC Cast and development and operational personnel. Such changes to our staffing of the LFC Cast and or development and operational personnel may be disruptive to our business. We are also substantially dependent on finding and maintaining development, promotional and operations personnel because of the complexity of our video and event productions. We do not have employment agreements with any of our LFC Cast and/or development or operations personnel and, therefore, they could terminate their relationship with us at any time.
A decline in general economic conditions could adversely affect our business.
Our operations are affected by general economic conditions, which generally may affect consumers' disposable income. The demand for entertainment and leisure activities tends to be highly sensitive to the level of consumers' disposable income. A decline in general economic conditions could reduce the level of discretionary income that our fans and potential fans have to spend on our live and televised entertainment and consumer products, which could adversely affect our revenues.
Risks Related to Our Common Stock
Our shares of common stock are not registered under the Exchange Act and as a result we have limited reporting duties which could make our common stock less attractive to investors
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Our shares of Common Stock are not registered under the Exchange Act. As a result, we will not be subject to the federal proxy rules and our directors, executive officers and 10% beneficial holders will not be subject the reporting requirements of Section 13 (a) of the Exchange Act or Section 16 of the Exchange Act. In additional our reporting obligations under Section 15(d) of the Exchange Act may be suspended automatically if we have fewer than 300 shareholders of record on the first day of our fiscal year. Our common shares are not registered under the Securities Exchange Act of 1934, as amended, and we do not intend to register our shares of Common Stock under the Exchange Act for the foreseeable future, provided that, we will register our shares of Common Stock under the Exchange Act if we have, after the last day of our fiscal year, more than either (i) 2000 persons; or (ii) 500 shareholders of record who are not accredited investors, in accordance with Section 12(g) of the Exchange Act. As a result, although, upon the effectiveness of the Registration Statement of which this prospectus forms a part, we will be required to file annual, quarterly, and current reports pursuant to Section 15(d) of the Exchange Act, as long as our shares of Common Stock are not registered under the Exchange Act, we will not be subject to Section 14 of the Exchange Act, which, among other things, prohibits companies that have securities registered under the Exchange Act from soliciting proxies or consents from shareholders without furnishing to shareholders and filing with the Securities and Exchange Commission a proxy statement and form of proxy complying with the proxy rules. In addition, so long as our shares of Common Stock are not registered under the Exchange Act, our directors and executive officers and beneficial holders of 10% or more of our outstanding shares of Common Stock will not be subject to Section 16 of the Exchange Act. Section 16(a) of the Exchange Act requires executive officers and directors, and persons who beneficially own more than 10% of a registered class of equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of shares of Common Stock and other equity securities, on Forms 3, 4 and 5, respectively. Such information about our directors, executive officers, and beneficial holders will only be available through this (and any subsequent) Registration Statement, and periodic reports we file thereunder. Furthermore, so long as our shares of Common Stock are 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.
Because our common stock is not registered under the Securities Act of 1934, as amended, our reporting obligations under Section 13(A) and 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 13(a) and 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.
Any issuance of shares of our Common Stock or senior securities in the future could have a dilutive effect on the value of our existing stockholders’ shares.
If we raise additional funds through the issuance of equity securities or debt convertible into equity securities, the percentage of stock ownership by our existing stockholders would be reduced. In addition, such securities could have rights, preferences, and privileges senior to those of our current stockholders, which could substantially decrease the value of our securities owned by them. Depending on the share price we are able to obtain, we may have to sell a significant number of shares in order to raise the necessary amount of capital. Our stockholders may experience dilution in the value of their shares as a result.
Future sales of restricted shares could decrease the price a willing buyer would pay for shares of our Common Stock and impair our ability to raise capital.
Future sales of substantial amounts of our shares, or the appearance that a large number of our shares are available for sale, could adversely affect t prices prevailing and could impair our ability to raise capital through the sale of our securities.
State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell your shares.
Secondary trading in Common Stock registered for re-sale will not be possible in any state until the Common Stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the Common Stock in any particular state, the Common Stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our Common Stock, the liquidity for the Common Stock could be significantly impacted thus causing you to realize a loss on your investment.
If the estimates that we make, or the assumptions upon which we rely, in preparing our financial statements prove inaccurate, our future financial results may vary from expectations. Failure to meet expectations may decrease the price of our securities
Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, stockholders’ equity, revenues and expenses, the amounts of charges accrued by us and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual performance may be higher or lower than our estimates for a variety of reasons, including unanticipated competition, regulatory actions or changes in one or more of our contractual relationships. We cannot assure you, therefore, that any of our estimates, or the assumptions underlying them, will be correct.
If significant business or product announcements by us or our competitors cause fluctuations in our stock price, an investment in our stock may suffer a decline in value.
The market price of our Common Stock may be subject to substantial volatility as a result of announcements by us or other companies in our industry, including our collaborators and competitors. Announcements that may subject the price of our Common Stock to substantial volatility include announcements regarding:
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our operating results, including the amount and timing of revenue generation; and
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significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors.
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As a result, we believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as any indication of future performance. Due to all of the foregoing factors, it may be that in some future year or quarter our operating results will be below the expectations of public market analysts and investors. In that event, the price of our Common Stock would likely be materially adversely affected.
There is no assurance of a public market or that our common stock will ever trade on a recognized exchange. Therefore, you may be unable to liquidate your investment in our stock.
There is no established public trading market for our Common Stock and there can be no assurance that one will ever develop. Market liquidity will depend on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result, holders of our securities may not find purchasers for our securities should they to sell securities held by them. Consequently, our securities should be purchased only by investors having no need for liquidity in their investment and who can hold our securities for an indefinite period of time.
Securities analysts may not initiate coverage of our shares or may issue negative reports, which may adversely affect the trading price of the shares.
We cannot assure you that securities analysts will cover our company. If securities analysts do not cover our company, this lack of coverage may adversely affect the trading price of our shares. The trading market for our shares will rely in part on the research and reports that securities analysts publish about us and our business. If one or more of the analysts who cover our company downgrades our shares, the trading price of our shares may decline. If one or more of these analysts ceases to cover our company, we could lose visibility in the market, which, in turn, could also cause the trading price of our shares to decline. Further, because of our small market capitalization, it may be difficult for us to attract securities analysts to cover our company, which could significantly and adversely affect the trading price of our shares.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have not declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our Common Stock will be your sole source of gain for the foreseeable future.
Market Conditions may adversely affect our Common Stock.
Some of the factors that may materially affect the market price of our common stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the MMA and entertainment industries, announcements made by our competitors or sales of our Common Stock. These factors may materially adversely affect the market price of our common stock, regardless of our performance.
We will also be effected by market regulation and trends which may make trading in securities such as our, difficult or undesirable. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.
Restrictions on the use of Rule 144 by Shell Companies or Former Shell Companies could affect your ability to resale our shares.
Historically, the SEC has taken the position that Rule 144 under the Securities Act, as amended, is not available for the resale of securities initially issued by companies that are, or previously were, blank check companies like us, to their promoters or affiliates despite technical compliance with the requirements of Rule 144. The SEC has codified and expanded this position in its amendments and releases which prohibit the use of Rule 144 for resale of securities issued by shell companies (other than business transaction related shell companies) or issuers that have been at any time previously a shell company. The SEC has provided an important exception to this prohibition, however, if the following conditions are met:
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the issuer of the securities that was formerly a shell company has ceased to be a shell company;
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the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
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the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and
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at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.
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As such, due to the fact that we were a shell company until the effective time of the LFC Acquisition, holders of "restricted securities" within the meaning of Rule 144 (e.g. the former LFC Shareholders and holders of Convertible Notes, and our recent PPO investors) will be subject to the conditions set forth herein. Therefore, sales under Rule 144 are prohibited for at least one year from the date this report is filed.
There is currently no public market for our Common Stock. Failure to develop or maintain a trading market could negatively affect the value of our Common Stock and make it difficult or impossible for you to sell your shares.
There is currently no public market for shares of our Common Stock and one may never develop. We plan for our Common Stock to be quoted on the OTC Markets. The OTC Markets is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. We may not ever be able to satisfy the listing requirements for our Common Stock to be listed on a national securities exchange, which are often a more widely-traded and liquid market. Some, but not all, of the factors which may delay or prevent the listing of our Common Stock on a more widely-traded and liquid market include the following:
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our stockholders' equity may be insufficient;
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the market value of our outstanding securities may be too low;
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our net income from operations may be too low;
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our Common Stock may not be sufficiently widely held;
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we may not be able to secure market makers for our Common Stock; and
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we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our Common Stock listed.
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Should we fail to satisfy the initial listing standards of the national exchanges, or our Common Stock is otherwise rejected for listing and remains listed on the OTC Markets or suspended from the OTC Markets, the trading price of our Common Stock could suffer and the trading market for our Common Stock may be less liquid and our Common Stock price may be subject to increased volatility.
Our stock may be traded infrequently and in low volumes, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell your shares.
Until our Common Stock is listed on a national securities exchange such as the New York Stock Exchange or the Nasdaq Stock Market, we expect our Common Stock to remain eligible for quotation on the OTC Markets, or on another over-the-counter quotation system, or in the "pink sheets." In those venues, however, the shares of our Common Stock may trade infrequently and in low volumes, meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or non-existent. An investor may find it difficult to obtain accurate quotations as to the market value of our Common Stock or to sell his or her shares at or near bid prices or at all. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our Common Stock, which may further affect the liquidity of our Common Stock. This would also make it more difficult for us to raise capital.
Because the Company conducted the LFC Acquisition by means of a reverse merger, it may not be able to attract the attention of major brokerage firms.
There may be risks associated with LFC becoming public through a "reverse merger" with us. Securities analysts of major brokerage firms may not provide coverage of the Company since there is no incentive to brokerage firms to recommend the purchase of its Common Stock. No assurance can be given that brokerage firms will, in the future, want to conduct any secondary offerings on the Company's behalf.
If securities analysts do not initiate coverage or continue to cover our Common Stock or publish unfavorable research or reports about our business, this may have a negative impact on the market price of our Common Stock.
The trading market for our Common Stock will depend on the research and reports that securities analysts publish about our business and the Company. It is often more difficult to obtain analyst coverage for companies whose securities are traded on the OTC Markets. We do not have any control over securities analysts. There is no guarantee that securities analysts will cover our Common Stock. If securities analysts do not cover our Common Stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
We do not anticipate paying dividends on our Common Stock, and investors may lose the entire amount of their investment.
To date, cash dividends have not been declared or paid on our Common Stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares of Common Stock, subject to the limitation outlined herein. If we do not pay dividends, our Common Stock may be less valuable because a return on your investment will only occur if our stock price appreciates. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.
We are registering an aggregate of 3,500,000 shares of common stock that could be issued under an Investment Agreement arrangement with Tangiers. The sale of such shares could depress the market price of our common stock.
We are registering an aggregate of 3,500,000 shares of common stock under this registration statement covering shares of our common stock that may be issued under an Investment Agreement with Tangiers. The resale of the shares of common stock by Tangiers into the public market will dilute the ownership interest and share of any dividends declared by the Company and could depress the market price of our common stock.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock trades on the OTC Pink under the symbol BOTY. The former symbol for our common stock was OILL and, after the reverse stock split, OILLD. The symbol was changed to BOTY on April 29, 2015. The stock has been quoted since April 2009. However, there were no reported trades until September 2009. The following table sets forth the range of quarterly high and low closing prices of our common stock as reported during the years ending December 31, 2015 and 2014, based on information on the OTC Markets website. These prices reflect inter-dealer quotations, do not include retail markups, markdowns or commissions and do not necessarily reflect actual transactions, and have been adjusted to reflect the 800-for-one reverse split.
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Fiscal quarter
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2015
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2014
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High
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Low
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High
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Low
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First quarter
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$
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18.00
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$
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25.00
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$
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28.00
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$
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10.40
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Second quarter
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25.00
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5.00
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24.00
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4.00
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Third Quarter
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5.00
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1.10
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6.40
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4.00
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Fourth Quarter
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2.30
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0.52
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8.00
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0.80
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Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, 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 acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of April 25, 2016, we had approximately 245 shareholders of our common stock.
Description of Securities to be Registered
Our authorized share capital consists of 400,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share. As of April 25, 2016, an aggregate of 19,769,977 shares of common stock and no shares of preferred stock were issued and outstanding.
Common Stock
All outstanding shares of common stock are of the same class and have equal rights and attributes. The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders of the Company. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available. In the event of liquidation, the holders of common stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not have cumulative or preemptive rights.
Preferred Stock
Our Articles of Incorporation authorizes the issuance of up to 10,000,000 shares of blank check preferred stock with designations, rights and preferences determined from time to time by its Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company.
Dividends
We have not paid any cash dividends to our shareholders. The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.
Common stock
The holders of outstanding shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and in such amounts as the board from time to time may determine. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders. There is no cumulative voting of the election of directors then standing for election. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors. Each outstanding share of common stock is, and all shares of common stock to be outstanding upon completion of this Offering will upon payment therefore be, duly and validly issued, fully paid and non-assessable.
Warrants
The Company presently has no warrants outstanding
Options
The Company presently has no options outstanding.
Convertible Notes
In February 2015, LFC borrowed a total of $5,250 from four individuals, for which LFC issued its 5% convertible promissory notes due September 30, 2015. Pursuant to the Share Exchange Agreement, these notes became converted into a total of 5,250,000 shares of common stock. These notes did not become convertible until the completion of the reverse acquisition and the conversion was effected through an exchange of the notes for 5,250,000 shares of common stock pursuant to the Share Exchange Agreement. The Company analyzed the convertible debt option for derivative accounting treatment under ASC Topic 815, "Derivatives and Hedging," and determined that the instrument does not qualify for derivative accounting. The Company therefore performed an analysis to determine if the conversion option was subject to a beneficial conversion feature and determined that the instrument did have a beneficial conversion feature of $5,250. The amount of the beneficial conversion feature was recorded to interest expense as the debt was exchanged for common stock on March 31, 2015. Two of the lenders are related parties.
Equity Compensation Plans
The following table summarizes the equity compensation plans under which our securities have been or may be issued as of December 31, 2015.
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Plan Category
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Number of securities to
be issued upon exercise
of outstanding options
and warrants
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Weighted-average
exercise price of
outstanding options and
warrants
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Number of securities
remaining available for future issuance under equity compensation
plans
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Equity compensation plans approved by security holders
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0
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$
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0
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2,125
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Equity compensation plan not approved by security holders
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0
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$
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0
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0
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The 2010 long-term incentive plan is the equity compensation plan that was approved by stockholders.
At December 31, 2015, we did not have any equity compensation plans that were not approved by stockholders.
MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of the results of our operations and financial condition should be read in conjunction with our financial statements and the related notes, which appear elsewhere in this report. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ from results discussed in the forward-looking statements, see "Forward Looking Statements."
Overview
On March 31, 2015 (the "Closing Date"), the Company, LFC, and the shareholders and the holders of Convertible Notes of LFC (each, a "LFC Shareholder" and together the "LFC Shareholders") entered into a share exchange agreement (the "Exchange Agreement"). Pursuant to the terms of the Exchange Agreement, we exchanged 16,750,000 shares of our Common Stock for (i) 11,500,000 shares of LFC Common Stock, and (ii) the Convertible Notes of LFC which were automatically convertible upon a merger into 5,250,000 shares of LFC Common Stock, as a result of which LFC has become a wholly-owned subsidiary of the Company, and we became an operating Company.
LFC is a media company focused on the development, production, promotion and distribution of original entertainment which we plan to make commercially available predominantly through live entertainment events, as well as through digital home video, broadcast television networks, video-on-demand and digital media channels. As a result, we have ceased to be a shell company. Effective as of April 1, 2015, we changed our name to "Lingerie Fighting Championships, Inc.," (by virtue of the short form merger with our new LFC subsidiary) to reflect our new business focus.
At the closing of the LFC Acquisition, pursuant to the Exchange Agreement:
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All shares of LFC Common Stock (including shares of LFC Common Stock issuable upon conversion of certain LFC Convertible Notes) issued and outstanding immediately prior to the closing of the LFC Acquisition were exchanged on a one-for-one basis into an aggregate of 16,750,000 shares of our Common Stock or approximately 84.70% of our outstanding Common Stock;
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The investors in our PPO financing upon the closing of the LFC Acquisition acquired an aggregate of 2,500,000 shares of our Common Stock or approximately 12.7% of our outstanding Common Stock for gross offering proceeds of $200,000;
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The 424,697 shares of our Common Stock issued and outstanding immediately prior to the LFC Acquisition and PPO financing, now only reflect approximately 2.16% of our outstanding Common Stock as a result of the said transactions;
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As of the effective date of the LFC Acquisition, the LFC Shareholders (which, for the avoidance of doubt includes the holders of Convertible Notes) received 84.70% of the outstanding shares of our Common Stock, pursuant to which each such LFC Shareholder was entitled his or her pro-rata portion thereof. The remaining 14.87% of such shares are held as follows; (i) the shareholders of the Company immediately prior to the closing of the LFC Acquisition retained approximately 2.16% of the outstanding shares of our Common Stock, pursuant to which each such Company shareholder was entitled to his or her pro-rata portion thereof and (ii) the five investors in the PPO financing received 12.65% of the outstanding shares of Common Stock.
Recent Development
Investment Agreement with Tangiers Global LLC
On April 4, 2016, we closed on an Investment Agreement with Tangiers Global, LLC, (“Tangiers”), a
Wyoming
limited liability company. Pursuant to the terms of the Investment Agreement, Tangiers committed to purchase up to $5,000,000 of our Common Stock during the Open Period. From time to time during the Open Period, the Company may deliver a drawdown notice to Tangiers which states the dollar amount that we intend to sell to Tangiers on a date specified in the put notice (the “Put Notice”). The maximum investment amount per notice shall be shall be equal to one hundred percent (100%) of the average of the daily trading dollar volume (U.S. market only) of the Common Stock for the ten (10) consecutive Trading Days immediately prior to the applicable Put Notice Date so long as such amount does not exceed an accumulative amount per month of $100,000 unless a prior approval of the Investor is obtained by the Company. The total purchase price to be paid, in connection to the Put Notice, by Tangiers shall be calculated at a eighteen percent (18%) discount of the lowest trading price of the Common Stock during the five (5) consecutive Trading Days immediately succeeding the applicable Put Notice Date.
In connection with the Investment Agreement, we also entered into a registration rights agreement (the “Registration Rights Agreement”) with Tangiers, pursuant to which we are obligated to file a registration statement with the SEC. We are obligated to use all commercially reasonable efforts to maintain an effective registration statement until termination of the Investment Agreement.
The Company signed a promissory note to pay to the order of Tangiers the Principal Sum of $100,000 as a Commitment fee. The promissory note maturity date is eight (8) months from April 4, 2016. In the event the S-1 related to the Equity Investment Agreement goes effective within 180 days of the April 4, 2016, 2016, the Maturity Date of this Note will be extended to ten (10) months.
If this registration statement is declared effective within 90 days of the execution date of the Investment Agreement, the Company and Holder agree the principal balance of the Note will immediately be reduced by $40,000.
At the election of Tangiers and upon written notice from Tangiers, at each Closing Date (as defined in the Investment Agreement) after the date which is six (6) months after the Effective Date, Holder shall retain (or the Company shall pay to Holder) an amount equal to ten percent (10%) of each Put Amount (as defined in the Investment Agreement), and the amounts shall be applied by Holder as follows: first against the amount of any unpaid interest or other fees, and second against any unpaid Principal Sum, until such time as all amounts of interest, fees and Principal sum have been paid by the Company.
The 3,500,000 shares to be registered herein represent 17.70% of the total issued and outstanding shares, assuming that the selling stockholder will sell all of the shares offered for sale.
Results of Operation
Year Ended December 31, 2015 and period from July 21, 2014 (inception) through December 31, 2014
We had revenue of $5,970 for the year ended December 31, 2015 ("fiscal 2015") and no revenue for the period from July 21, 2014 (inception) through December 31, 2014 ("fiscal 2014"). Cost of Services in fiscal 2015 was $32,902, compared to $0 Cost of Services incurred in fiscal 2014. General and administrative expenses, which consisted primarily of professional fees and payroll, were $171,053 for fiscal 2015 and $264 for the fiscal 2014, an increase of $170,789. As a result, we incurred a loss of $197,985 for fiscal 2015 as compared with a loss of $264 for fiscal 2014.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. At December 31, 2015, we had a cash balance of $21,683, representing the balance of cash received from the private placement of securities in fiscal 2014, and $3,580 as of December 31, 2014. The Company had a working capital deficiency of $15,943 at December 31, 2015 and a working capital of $3,464 as of December 31, 2014. The decrease in our working capital from approximately $19,406 was primarily related to the increase in accounts payable and accrued expenses.
Operating Activities
During fiscal 2015, we used $153,725 of cash in operating activities, reflecting our net loss of $197,985. During fiscal 2014, we used $148 of cash in our operating activities, reflecting our net loss of $264. The increase in cash used during fiscal 2015 was related to an increase in net losses of $197,985, offset by the amortization of beneficial conversion feature that provided $5,250, stock-based compensation of $7,600, and an increase in accounts payable and accrued liabilities of $31,410.
Investing Activities
During fiscal 2015, the Company provided $2,578 of cash in investing activities. Investing activities included cash received from a reverse merger transaction for $2,578. No investing activities occurred in fiscal 2014.
Financing Activities
During fiscal 2015, the Company provided $169,250 of cash in financing activities. We financed our operations proceeds from the sale of common stock of $200,000, borrowings on convertible debt of $1,400, and borrowing on convertible debt from a related party of $3,850. Cash used in financing activities included the repayment of notes of $12,000, and repayment of notes to a related party of $24,000.
During fiscal 2014, we financed our operations principally through proceeds from the sale of common stock of $1,215, and a capital contribution from a related party of $2,513.
Supplementary Cash Flow Disclosures
During fiscal 2015, we reported supplemental disclosure of cash flow for non-cash transactions of net liabilities assumed in a reverse merger of $39,522, a discount to convertible debt for beneficial conversion feature of $5,250, and common shares issued for conversion on debt of $5,250.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Significant Accounting Estimates and Policies
The discussion and analysis of our financial condition and results of operations is based upon our financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of our products, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Income Taxes
We account for income taxes in accordance with ASC 740, Income Taxes, which requires that we recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.
We adopted ASC 740-10-25, Income Taxes- Overall-Recognition, on January 1, 2007, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. We must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. We did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.
Recent accounting pronouncements
In 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders’ equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company evaluated and adopted ASU 2014-10 during 2014.
The Company has evaluated these recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.
