ITEM 1. BUSINESS
We are an enterprise organized for the purpose of finding, documenting and collecting evidence of the existence of the creature known as Bigfoot, in direct connection with this purpose is the development and production and distribution of documentary and fictional films about the creature.
Below is a table of the DVD movies we have in inventory.
DVD MOVIE TITLE
ORDER
DATE
QTY
DVD’S
DVD COST
EA
BIGFOOT LIVES
1/6
1,783
$0.81
ANATOMY OF A BIGFOOT HOAX
2/11
$1.40
ANATOMY OF A BIGFOOT HOAX
1/12
-
$1.35
BIGFOOT LIVES 2
6/11
$1.89
BIGFOOT LIVES 2 **
1/11
-
$1.35
BIGFOOT LIVES 3
1/12
$1.35
HOAX OF THE CENTURY
10/12
$1.35
IN THE SHADOW OF BIGFOOT
1/12
$1.35
PURSUIT
12/14
1,100
$1.35
**Note: First 500 of Bigfoot Lives 2 had defective packaging and labels and had to be re-manufactured. Used for Advertising promotions and mailings to various vendors and promotional events.
In addition to the DVD Movies we have added T-shirts and other “branded” products to our inventory. In an effort to further the Bigfoot brand we have developed artwork that has been used to wrap our travel trailer so that the public can recognize our team by our unique logo. We plan to use some of the revenue from the product sales to offset expedition expenses.
Bigfoot Project Investments Inc. was incorporated pursuant to the laws of the State of Nevada on November 30, 2011. Bigfoot Project Investments Inc. acquired Searching for Bigfoot Inc. for common shares. The agreement contains the customary warranties and representations. After the closing of the acquisition, the business and operations of Searching for Bigfoot Inc. were the business and operations of the issuer.
In 2006, a Nevada corporation; “Searching for Bigfoot Inc.” was formed, to research in determining the existence of a creature commonly referred to as “Bigfoot”. For the past six years “Searching for Bigfoot Inc.” has financed research and expeditions throughout the United States and Canada.
Beginning as a simple organization with the intent of raising funds to produce a movie for distribution, “Searching for Bigfoot Inc.” evolved to a point where it acquired significant value in Video/film footage, materials, artifacts, and relationships with organizations interested in “Bigfoot” existence around the country.
Recently a decision was made to pursue this opportunity as an ongoing investment business venture. Management team members were brought together to form an entertainment investment corporation that would capitalize on both current and future investment projects.
On November 30, 2011 a Nevada corporation, Bigfoot Project Investments Inc., was created.
Bigfoot Project Investments Inc.’s., purpose is to focus all our projects into one investment holding company and to file for a public offering. We have consolidated all projects into one investment marketing plan, which we believe is more effective than a single plan, thereby increasing the overall profits of the projects than if they were individually marketed.
We intend to create investment project entertainment properties surrounding the mythology, research and hopefully, capture the creature known as Bigfoot.
We intend to become an entertainment investment company, where our competitive advantage is our developed knowledge base and the advanced level of maturity of our projects. We intend to capitalize on “Searching for Bigfoot Inc.” current inventory of projects through agreements; allowing our company to continue creation of media properties and the establishment of physical locations, partnerships and alliances with organizations to augment investment markets to create revenue as a stand- alone enterprise.
On January 11, 2013, The Board of Directors of Bigfoot Project Investments Inc. passed a resolution to acquire Searching for Bigfoot Inc. and all the projects and assets currently owned by “Searching for Bigfoot Inc.
The inventory of projects currently consists of nine DVD Movies which are being marketed to both DVD and Video On Demand (VOD) domestic distribution markets. Additionally, preliminary investment plans are being negotiated for a 3D Movie with a movie production company. Foreign distribution markets have recently become available and our contracted marketing company, The Bosko Group, is in the process of negotiating contracts for all nine DVD movies. This market would include the movies being subtitled and dubbed in foreign languages throughout Europe, Asia and South America. Currently we are represented by our contracted marketing distributor, The Bosko Group, in which they represent and sell the rights for the Bigfoot Project Investments Inc. nine DVD Movies.
Bigfoot Project Investments Inc. entered into two separate agreements with its distributor The Bosko Group in May 2017. One agreement is for the re-release of seven of the Company’s documentaries with new introductions and commentaries. The other agreement is for the production of five new feature length films depicting the “Dark and Violent” world of Bigfoot.
We are currently negotiating agreements with a 3D Movie Production Company to produce a movie called “Bigfoot 3D”. The draft script has been written and is being finalized with Golden Leaf Pictures, the production company. Investment funding is required to finalize negotiation of contracts and start production of the movie. There are no agreements in place to provide the funding at this time.
We plan to continue to amass artifacts (footprint castings, skeletal, hair, skin, blood and other creature remains), and media products such as DVD videos, photographs, audio and Written documents, Televised, and Movie media events from our continued Bigfoot Expeditions throughout the United States and Canada. We will use the artifacts we currently have and the artifacts we intend to acquire. The collection of artifacts is used as scientific evidence to substantiate the existence of this creature known as “Bigfoot” as a species through proper DNA testing and scientific examination. The evidence that the artifacts provide are provided to the scientific community as evidence in documentation of this creature as a new species. This documentation is used in media projects (Television, DVD movies, publications etc.) for marketing and the management believes it has substantial value. Media products such as DVD videos, photographs, audio and written documents, Televised, and Movie media events from our continued Bigfoot Expeditions provide the basis for our media projects, which are marketed and provide revenue. Additionally we will negotiate and purchase intellectual and physical properties relating to the creature as opportunities become available that will continue to feed the development of additional projects.
Bigfoot Project Investments Inc. bears a high degree of risk, lacking maturity and not having a background or reference point to evaluate or compare company performance to the investor. Each of the projects we market will be carefully reviewed for market value by the Board of Directors. These Projects will be based on agreements with property owners of other organizations. Personnel in each project area will share in the responsibility running our company’s operations.
Employees
Currently, we have no full time employees other than our officers and directors. We anticipate that we will be unable to hire any employees in the next twelve months, unless we generate significant revenues. Meanwhile, we intend to utilize outsourcing quality personnel in conjunction with the talents of our Current Officers and Directors. We believe our future success depends in large part upon the continued services of our current Officers and Directors.
Available Information
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. All of our reports are able to be reviewed through the SEC’s Electronic Data Gathering Analysis and Retrieval System (EDGAR) which is publicly available through the SEC’s website (http://www.sec.gov).
We intend to furnish to our stockholders annual reports containing financial statements audited by our independent certified public accountants and quarterly reports containing reviewed unaudited interim financial statements for the first three-quarters of each fiscal year. You may contact the Securities and Exchange Commission at (800) SEC-0330 or you may read and copy any reports, statements or other information that we file with the Securities and Exchange Commission at the Securities and Exchange Commission’s public reference room at the following location:
Public Reference Room
100 F. Street N.W.
Washington, D.C. 2054900405
Telephone: (800) SEC-0330
ITEM 1A.
ITEM 1A. RISK FACTORS
We are at an early operational stage and our success is subject to the substantial risks inherent in the establishment of a new business venture.
The implementation of our business strategy is in an early stage. Our business and operations should be considered to be in an early stage and subject to all of the risks inherent in the establishment of a new business venture. Accordingly, our intended business and operations may not prove to be successful in the near future, if at all. Any future success that we might enjoy will depend upon many factors, several of which may be beyond our control, or which cannot be predicted at this time, and which could have a material adverse effect upon our financial condition, business prospects and operations and the value of an investment in our company.
We may have difficulty raising additional capital, which could deprive us of necessary resources.
We expect to continue to devote significant capital resources to inventory. In order to support the initiatives envisioned in our business plan, we will need to raise additional funds through public or private debt or equity financing, collaborative relationships or other arrangements. Our ability to raise additional financing depends on many factors beyond our control, including the state of capital markets and the market price of our common stock. Because our common stock is not listed on a major stock market, many investors may not be willing or allowed to purchase it or may demand steep discounts. Sufficient additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.
We expect to raise additional capital during 2018 but we do not have any firm commitments for funding. If we are unsuccessful in raising additional capital, or the terms of raising such capital are unacceptable, we may have to modify our business plan and/or significantly curtail our planned activities and other operations.
There are substantial doubts about our ability to continue as a going concern and if we are unable to continue our business, our shares may have little or no value.
The company’s ability to become a profitable operating company is dependent upon its ability to generate revenues adequate to support our cost structure has raised substantial doubts about our ability to continue as a going concern. We plan to attempt to raise additional equity capital by selling shares through one or more private placement or public offerings. However, the doubts raised, relating to our ability to continue as a going concern, may make our shares an unattractive investment for potential investors. These factors, among others, may make it difficult to raise any additional capital.
Failure to effectively manage our growth could place strains on our managerial, operational and financial resources and could adversely affect our business and operating results.
Our growth has placed, and is expected to continue to place, a strain on our managerial, operational and financial resources. Further, if our business grows, we will be required to manage multiple relationships. Any further growth by us, or an increase in the number of our strategic relationships will increase this strain on our managerial, operational and financial resources. This strain may inhibit our ability to achieve the rapid execution necessary to implement our business plan, and could have a material adverse effect upon our financial condition, business prospects, operations and the value of an investment in our company.
Risks Relating to Our Business
Related Party Transaction Risk
In January 2013, Bigfoot Project Investments, Inc. executed a promissory note in the amount of $484,029 as part of the asset transfer agreement for the transfer of all assets held by Searching for Bigfoot, Inc. During 2013, the Company increased the balance of the promissory note by $489 to add an asset that was not included in the original transfer. The terms of the note are that the unpaid principal and the accrued interest are payable in full on January 31, 2018. Bigfoot Project Investments Inc. disbursed $12,148 as payment on the principal of the note. The principal balance of the note as of July 31, 2017 was $472,370. The holders of the note have agreed to allow the company additional time to develop revenue producing projects which will allow the company to pay this debt.
In January 2013, Bigfoot Project Investments, Inc. acquired all the assets of Searching for Bigfoot, Inc. Since the majority shareholder of Searching for Bigfoot, Inc. is also the majority shareholder in Bigfoot Project Investments, Inc. the asset acquisition was treated as a related party transaction and was not considered an arm’s length transaction under Generally Accepted Accounting Principles.
The assets acquired were transferred over at the existing book value listed on the balance sheet of Searching for Bigfoot, Inc. at the time of transfer. The transfer agreement called for the issuance of 4,400,000 shares of common stock which were valued at $.10 per share and the issuance of a promissory note in the amount of $484,029. The Company recorded a deemed distribution related to this transaction in the amount of $924,029.
As part of the asset transfer agreement Bigfoot Project Investments, Inc. received the following assets:
Footprint cast of Bigfoot - 73 original casts
Photographs of Dead Creature from Strickler, Arkansas 1994 Dead Creature Incident
109-inch Skeleton
Various Media Artifacts - Video TV News Media - 52 news stories
Contract to sell Dinosaur fossil - most recent estimate by Paleontologist $1.2 million dollars
Rubber suit from 2008 hoax
Various DNA samples - Hair, and nails
License to use 6 dinosaur displays
Exclusive rights to the Bigfoot Website
Bigfoot Live Radio Show
Bigfoot Live Radio Show Website
360 hours of raw footage from expeditions for movie development
Various DVD Movies and Documentary film projects
Exclusive rights to all current contracts negotiated under Searching For Bigfoot, Inc. including an advertising/marketing contract with The Bosko Group which is included in the exhibits.
The note is held by two of the shareholders of the Company. C. Thomas Biscardi who owns 47.4% of the issued stock and Dennis J. Kazubowski who owns 2.12% of the issued stock. The Company currently does not have the means to satisfy this note by the due date, however, Management is confident that the terms will be renegotiated, and the Company will be able to satisfy the terms of the note by the renegotiated due date.
We lack an operating history and have losses that we expect to continue into the future. There is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, we will cease operations and you will lose your investment.
We were incorporated on November 30, 2011 and we have only generated minimal revenues. We have no operating history upon which an evaluation of our future success or failure can be made. Our accumulated deficit through July 31, 2017 is $3,911,996.
Our operating results will depend on our ability to acquire and maintain customers. Any capacity restraints or systems failures could harm our business, results of operations and financial condition.
Because we will be limiting our marketing activities, we may not be able to attract enough customers to operate profitably. If we cannot operate profitably, we may have to suspend or cease operations.
Our ability to achieve and maintain profitability and positive cash flow is dependent upon:
our ability to develop and continually update our products for sale;
our ability to procure and maintain commercially reasonable terms relationships with third parties to develop and maintain our productions, network and transaction processing systems;
our ability to identify and pursue mediums through which we will be able to market our products;
our ability to attract customers to purchase our productions;
improve our ability to generate revenues; and
our ability to manage growth by managing administrative overhead.
Based upon current plans, we expect to incur operating losses in future periods because we will be incurring expenses and generating minimal revenues. We cannot guarantee that we will be successful in generating additional revenues in the future. Failure to generate additional revenues may cause you to lose your investment.
We may be unable to protect the intellectual property rights that we have.
Majority shareholder and Director Carmine T. Biscardi and William F. Marlette, Director, developed the concepts behind our business plan. They have assigned any rights that they may have had in that line to us. We own copyrights on DVD Movies Bigfoot Lives and Anatomy of a Bigfoot Hoax. Copyrights are pending for DVD Movies Legend of Bigfoot, In the Shadow of Bigfoot, Bigfoot Alive in 82, Bigfoot Lives-2, Bigfoot Lives-3, Hoax of the Century, and Pursuit (The Search for Bigfoot).
Bigfoot Project Investments Inc. delivered the first of the five feature length films to its distributor in July 2017, resulting in reportable income per the contract of $73,500. This film will be the premier of the “Dark and Violent” world of Bigfoot series. The film is in the final stages of design and packaging which are handled by our distributor and is expected to be released upon completion of these operations.
Our controlling shareholder has significant influence over the Company.
As of July 31, 2017, Carmine T. Biscardi, owns 47.4% of the outstanding common stock. As a result, Mr. Biscardi currently possesses and will continue to retain significant influence over our affairs. His stock ownership and relationships with members of our board of directors, may have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company, which in turn could materially and adversely affect the market price of our common stock.
Minority shareholders of Bigfoot Project Investments Inc. will be unable to affect the outcome of stockholder voting as long as Mr. Biscardi retains a controlling interest.
We intend to rely on a combination of copyright, trademark and trade secret protection and non-disclosure agreements with employees and third-party service providers to establish and protect the intellectual property rights that we have in the material we develop. There can be no assurance that our competitors will not independently develop products that are substantially equivalent or superior to ours. There also can be no assurance that the measures we adopt to protect our intellectual property rights will be adequate to do so. The ability of our competitors to develop products or other intellectual property rights equivalent or superior to ours or our inability to enforce our intellectual property rights could have a material adverse effect on our results of operation.
Though we do not believe that our business concepts will infringe on the intellectual property rights of third parties in any material respect, there can be no assurance that third parties will not claim infringement by us with respect to them. Any such claim, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could have a material adverse effect on our business, results of operations and financial condition.
Changing consumer preferences will require periodic revising.
As a result of changing consumer preferences, there can be no assurance that any of our motion pictures and DVD’s concepts will continue to be popular for a period of time. Our success will be dependent upon our ability to develop new and improved programs. Our failure to sustain market acceptance and to produce acceptable margins could have a material adverse effect on our financial condition and results of operations.
We face intense competition and our inability to successfully compete with our competitors will have a material adverse effect on our results of operation.
The Entertainment industry is highly competitive. Many of our competitors have longer operating histories, greater brand recognition, broader product lines and greater financial resources and advertising budgets than we do. Many of our competitors offer similar products or alternatives to our services. There can be no assurance that we will be available to support our operation or allow us to seek expansion. There can be no assurance that we will be able to compete effectively in this marketplace.
We may be required to protect our intellectual property at great cost, expense and time of management which may detract from the successful operation of the Company.
Intellectual property claims against us can be costly and could impair our business. Other parties may assert infringement or unfair competition claims against us. We cannot predict whether third parties will assert claims of infringement against us, or whether any future assertions or prosecutions will harm our business. If we are forced to defend against any such claims, whether they are with or without merit or are determined in our favor, then we may face costly litigation, diversion of technical and management personnel, or product shipment delays. As a result of such a dispute, we may have to develop non-infringing technology or enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may be unavailable on terms acceptable to us, or at all. If there is a successful claim of product infringement against us and we are unable to develop non-infringing technology or license the infringed or similar technology on a timely basis it could impair our business.
If we do not attract customers on cost-effective terms, we will not make a profit, which ultimately will result in a cessation of operations.
Our success depends on our ability to attract customers on cost-effective terms. Our strategy to attract customers via our advertising, which has not been formalized or implemented, includes viral marketing, the practice of generating “buzz” among Internet users in our products through the developing and maintaining web logs or “blogs”, online journals that are updated frequently and available to the public, postings on online communities such as Yahoo!(R) Groups, and other methods of getting internet users to refer others to our services by e-mail or word of mouth; search engine optimization, marketing via search engines by purchasing sponsored placement in search results; and entering into affiliate marketing relationships with providers to increase our access to customers. We expect to rely on direct marketing as the primary source of customers. Our marketing strategy may not be enough to attract sufficient traffic to develop a consistent customer base. This lack of response would cause us to pursue different avenues of marketing and promotional venues. If we are unsuccessful in attracting a sufficient amount of traffic, our ability to get customers and our financial condition will be harmed.
To date we do not have an established customer list. We cannot guarantee that we will ever have an established customer list. Even if we obtain customers, there is no guarantee that we will generate a profit. If we cannot generate a profit, we will have to suspend or cease operations.
We will be dependent on third parties to develop and maintain our original plan (based on concepts developed by us and fulfill a number of customer service and other retail functions). If such parties are unwilling or unable to continue providing these services, our business could be severely harmed.
We will rely on third parties to develop and maintain some of our new concepts (based on concepts developed by us). To date we have not entered into any formal relationship with any third parties to provide these services. Our success will depend on our ability to build and maintain relationships with such third-party- service providers on commercially reasonable terms. If we are unable to build and maintain such relationships on commercially reasonable terms, we will have to suspend or cease operations. Even if we are able to build and maintain such relationships, if these parties are unable to deliver products on a timely basis, our customers could become dissatisfied and decline to make future purchases. If our customers become dissatisfied with the services provided by these third parties, our reputation and our company could suffer.
We lack an operating history and have losses that we expect to continue into the future. There is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, we will cease operations and you will lose your investment.
We require minimum funding of approximately $125,000 to conduct our proposed operations for a period of one year. This includes the cost of this registration as well as normal operating costs. If we are not able to raise this amount, or if we experience a shortage of funds prior to funding we may utilize funds from our officers and directors who have informally agreed to advance funds to allow us to pay for professional fees, including fees payable in connection with the filing of this registration statement and operation expenses. However, they have no formal commitment, arrangement or legal obligation to advance or loan funds to the company. After one year we may need additional financing.
Going forward, the Company will have ongoing SEC compliance and reporting obligations, estimated as approximately $75,000 annually. Such ongoing obligations will require the Company to expend additional amounts on compliance, legal and auditing costs. In order for us to remain in compliance, we will require future revenues to cover the cost of these filings, which could comprise a substantial portion of our available cash resources. If we are unable to generate sufficient revenues to remain in compliance, it may be difficult for you to resell any shares you may purchase, if at all.
We may depend on outside parties for professional services related to reports under the Securities and Exchange Act of 1934.
Because our current officers and directors have limited prior experience in financial accounting and preparation of reports under the Securities Exchange Act of 1934, we may have to hire additional experienced personnel to assist us with the preparation thereof. If we need the additional experienced personnel and we do not hire them, we could fail in our plan of operations and have to suspend or cease operations entirely and you could lose your investment.
Being reporting under the Exchange Act of 1934 will add costs to the Company’s operations.
The Company will need to file reports under the Exchange Act of 1934 which will involve expenses for financial accounting and preparation of the reports which costs will lower any net profit of the corporation and may be significant to cause the Company to cease operations.
In the future, there may not be effective disclosure and accounting controls to comply with applicable laws and regulations which could result in fines, penalties and assessments against us.
Our Officers and Directors are responsible for our managerial and organizational structure which will include preparation of disclosure and accounting controls under the Sarbanes Oxley Act of 2002. When these controls are implemented, they will be responsible for the administration of the controls. Should they not have sufficient experience, they may be incapable of creating and implementing the controls which may cause us to be subject to sanctions and fines by the Securities and Exchange Commission.
We are completely dependent on officers and directors to guide our initial operations, initiate our plan of operations, and provide financial support. If we lose their services we will have to cease operations.
Our success will depend entirely on the ability and resources of our officers and directors. If we lose their services we will cease operations. Presently, our officers and directors are committed to providing their time and financial resources to us.
Industry-related risk factors:
The short term nature of contracts in our industry makes revenues difficult to project.
Many standard contracts for entertainment projects are short term. If contracts are not maintained or new contracts are not obtained, operations that maintain the structural integrity of the company will be adversely affected. Additionally, a substantial part of our projected revenue will come from future clients. The loss of such contracts from reductions in force or other factors could have an adverse effect on the company’s operations.
Our business is dependent on repeat customers. Furthermore, the standard one-year contract used with most suppliers can be terminated by either party with a short written notice. Some long term customers will be serviced under month-to-month extensions of the written contract. In the case of a major client, services may be provided under an oral contract which is an extension of the standard one year contract. Should an industry-wide or nationwide economic slowdown cause a reduction in force among our service providers, or if we are otherwise unable to maintain our existing contracts or obtain additional service contracts, our business, financial condition, and results of operations could be adversely affected.
Some services we require may subject our company to liability for substantial damages not covered by insurance.
Since we intend to position ourselves for premium, high quality projects in an industry that is traditionally price-sensitive, damage to our professional reputation, including as the result of a well-publicized breach of contract or incident, could have a material adverse effect on our business.
To a large extent, relationships with clients and customer expectations and perception of the quality of our products are in large part determined by regular contact between clients and sales. If a customer is dissatisfied with our products there may be more damage in our business than in non-service related businesses. A well-publicized incident of breach of contract by us could result in a negative perception of our company and our services, damage to our reputation, and the loss of current or potential customers. This would have an adverse effect on our business, financial condition, and results of operations.
Acquisitions may not be available or economical which may slow the Company’s growth.
Our growth strategy includes the evaluation of selective acquisition opportunities which may place significant demands on our resources. We may not be successful in identifying suitable acquisition opportunities (concepts, scripts, casts, directors, technicians, etc.) and if such opportunities are identified, we may not be able to obtain acceptable financing for the acquisition, reach agreeable terms with acquisition candidates, or successfully integrate acquired businesses.
An element of our growth strategy is the acquisition and integration of projects in order to increase our density within certain geographic areas, capture market share in the markets in which operations currently exist and improve profitability. We will be unable to acquire other projects if we are unable to identify suitable acquisition opportunities, obtain financing on acceptable terms, or reach mutually agreeable terms. In addition to the extent that consolidation becomes more prevalent in our industry, the prices for suitable project candidates may increase to unacceptable levels thereby limiting our growth ability.
Our growth through selective projects may place significant demands on management and our operational and financial resources. Acquisitions involve numerous risks including the diversion of our management’s attention from other business concerns, the possibility that current operating and financial systems and controls may be inadequate to deal with our growth and the potential loss of key employees.
We may also encounter difficulties in integrating any project we may acquire or will have recently acquired, with our existing operations. Success in these transactions depends on our ability to be successful with our operational and financial systems, integrate and retain the customer base and realize cost reduction synergies.
Failure to integrate or to manage growth could have a material adverse effect on our business. Further, we may be unable to maintain or enhance the profitability of any acquired project, consolidate its operations to achieve cost savings, or maintain or renew any of its contracts.
In addition, liabilities may exist that we fail or are unable to discover in the course of performing due diligence investigations on any project we may acquire or have recently acquired. Also there may be additional costs relating to acquisitions including but not limited to possible purchase price adjustments. Any of our rights to indemnification from sellers to us, even if obtained, may not be enforceable, collectible, or sufficient in amount, scope or duration to fully offset the possible liabilities associated with the project or property acquired. Any such liabilities, individually or in aggregate, could have a material adverse effect on our business.
If we cannot effectively compete with new or existing project providers, the results of our operations and financial condition will be severely affected.
Our industry is intensely competitive. Our direct competitors include companies that are national and international in scope and some competitors have substantially more personnel, financial, technical and marketing resources than we do, generate greater revenues than we do, and have greater name recognition than we do. The recent trends toward consolidation in the industry may lead to further competition. In addition, some competitors may be willing to offer similar services at lower prices, accept a lower profit margin, or expend more capital to maintain or increase their business. If we are unable to successfully compete with new or experienced providers, our business, financial condition, and results of operations will be adversely affected.
Internet regulation may dampen our growth.
We are subject to the same federal, state and local laws as other companies obtaining business from the Internet. Today there are relatively few laws specifically directed towards conducting business on the Internet. However, due to the increasing popularity and use of the Internet, many laws and regulations relating to the Internet are being debated at the state and federal levels. These laws and regulations could cover issues such as user privacy, freedom of expression, pricing, fraud, quality of products and services, taxation, advertising, intellectual property rights and information security. Applicability to the Internet of existing laws governing issues such as property ownership, copyrights and other intellectual property issues, taxation, libel, obscenity and personal privacy could also harm our business. Current and future laws and regulations could harm our business, results of operation and financial condition
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
ITEM 2. PROPERTIES
We currently lease office space at 570 El Camino Real NR-150, Redwood City, CA 94063 as our principal offices. We believe these facilities are in good condition, but that we may need to expand our leased space as our business efforts increase.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, 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. We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASE OF EQUITY SECURITIES
Market Information
Our common stock is traded on the OTC Pink. The stock has been actively trading since the August 29, 2016 listing. Factors we discuss in this report, including the many risks associated with an investment in our securities, may have a significant impact on the market price of our common stock.
The ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations of that state. A number of states require that an issuer’s securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Presently, we have no plans to register our securities in any particular state.
Holders of Common Stock
As of July 31, 2017, we had 138 stockholders of record of the 223,397,000 shares outstanding.
Dividends
The payment of dividends is subject to the discretion of our Board of Directors and will depend, among other things, upon our earnings, our capital requirements, our financial condition, and other relevant factors. We have not paid or declared any dividends upon our common stock since our inception and, by reason of our present financial status and our contemplated financial requirements; do not anticipate paying any dividends upon our common stock in the foreseeable future.
We have never declared or paid any cash dividends. We currently do not intend to pay cash dividends in the foreseeable future on the shares of common stock. We intend to reinvest any earnings in the development and expansion of our business. Any cash dividends in the future to common stockholders will be payable when, as and if declared by our Board of Directors, based upon the Board’s assessment of:
our financial condition;
earnings;
need for funds;
capital requirements;
prior claims of preferred stock to the extent issued and outstanding; and
other factors, including any applicable laws.
Therefore, there can be no assurance that any dividends on the common stock will ever be paid.
Securities Authorized for Issuance under Equity Compensation Plans
We currently do not maintain any equity compensation plans.
Recent Sales of Unregistered Securities
We have no recent sales of unregistered securities.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for the historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including the risks described in “Risk Factors” and elsewhere in this annual report. Our discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes and with the understanding that our actual future results may be materially different from what we currently expect.
OVERVIEW AND OUTLOOK
In January 2013, Bigfoot Project Investments Inc. acquired all the assets of Searching for Bigfoot Inc. Since the majority shareholder of Searching for Bigfoot, Inc. is also the majority shareholder in Bigfoot Project Investments Inc. the asset acquisition was treated as a related party transaction and was not considered an arm’s length transaction under Generally Accepted Accounting Principles.
The transfer agreement called for the issuance of 4,400,000 shares of common stock which were valued at $.10 per share and the issuance of a promissory note in the amount of $484,029. The Company recorded a deemed distribution related to this transaction in the amount of $924,029. In August 2013, the Company increased the promissory note by $489 to add an asset that was not included in the original transfer.
As part of the asset transfer agreement Bigfoot Project Investments, Inc. received the following assets:
Footprint cast of Bigfoot - 73 original casts
Photographs of Dead Creature from Strickler, Arkansas 1994 Dear Creature Incident
109-inch Skeleton
Various Media Artifacts - Video TV News Media - 52 news stories
Contract to sell Dinosaur fossil
Rubber suit from 2008 hoax
Various DNA samples - Hair, and nails
License to use 6 dinosaur displays
Exclusive rights to the Bigfoot Website
Exclusive rights to the Bigfoot Live Radio Show
Exclusive rights to the Bigfoot Live Radio Show Website
360 hours of raw footage from expeditions for movie development
Various DVD Movies and Documentary film projects
Exclusive rights to all current contracts negotiated under Searching For Bigfoot, Inc.
The above list is a complete list of the fixed assets for Bigfoot Project Investments, Inc.
We are a company who has, over the past years, developed nine DVD Movies; all of which have been completed for distribution. We have established a contract with a Media Marketing Distribution Company (The Bosko Group), who has contracted all of the nine DVD movies to their distribution agents. We are a company with only minimal revenues to date: we have minimal assets, and have incurred losses since inception.
We have in the past year, obtained two new contracts with our distribution company. The first contract is for a re-release of seven of the nine movies previously developed. Our distributor will provide new packaging and new introductions and commentaries for each release. The new editions are expected to be available on the market by the end of 2017.
The second contract is for the production of five new feature length films depicting a new look at the creature that the industry has seldom used. These films will be based on real encounters. The first of these films was completed in July 2017 and is expected to be on the market by the end of the calendar year 2017.
Bigfoot Project Investments Inc. plans to establish itself as the most reliable and dependable source for materials including documentaries, physical evidence, and eye witness accounts for the purpose of documenting the evidence of the existence of Bigfoot. Our major source of revenue will be the sale of documentaries and specials that follow our progress. We have found that there is a market for these films and have started selling them on a semi-regular basis. In addition to the film sales we plan on having expeditions to locations where there have been multiple eye witness accounts as well as periodic exhibitions of the physical evidence that has been accumulated. We plan on focusing our efforts on expeditions to locations that have had multiple eye witness reports to maximize the chances of locating the creature and producing films that will be marketable to the public.
Going Concern
The future of our company is dependent upon its ability to obtain financing and upon future profitable operations. Management has plans to seek additional capital through a private placement and public offering of its common stock, if necessary. Our auditors have expressed a going concern opinion which raises substantial doubts about the Company’s ability to continue as a going concern.
RESULTS OF OPERATIONS
Revenue
For the year ended July 31, 2017 we generated revenue of $84,297 compared to $2,236 for the year ended July 31, 2016.
Operating Expenses
Operating expenses during year ended July 31, 2017 were $2,652,252, consisting of general and administrative, expedition expense and professional fees. In comparison, operating expenses in the year ended July 31, 2016 were $328,239, consisting of general and administrative, expedition expense and professional fees. The increase in total expenses from 2016 to 2017 is primarily attributable to stock based compensation expense and additional expedition expenses due to increased research and filming for production contract.
Liquidity and Capital Resources
As of July 31, 2017, we had $1,105 in cash and did not have any other cash equivalents. The following table provides detailed information about our net cash flow for the years ended July 31, 2017 and 2016. To date, we have financed our operations through the issuance of stock and borrowings from shareholders and convertible notes from third parties.
In summary, our cash flows were as follows:
Operating activities
Net cash used in operating activities was $134,059 for the year ended July 31, 2017, as compared to $53,453 used in operating activities for the same period in 2016. The increase in net cash used in operating activities was primarily due to stock based compensation expense recorded.
Investing activities
Net cash used in investing activities was $981 for the year ended July 31, 2017, as compared to $0 used in investing activities for the same period in 2016. The company purchased equipment needed to fulfill the production contract.
Financing activities
Net cash provided by financing activities for the year ended July 31, 2017 was $135,493, as compared to $53,884 for the same period of 2016.
Since inception, we have financed our cash flow requirements through issuance of common stock, related party loans and convertible debt. As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations, pending receipt of increased revenues. Additionally, we anticipate obtaining additional financing to fund operations through common stock offerings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital. In the future we need to generate sufficient revenues from sales in order to eliminate or reduce the need to sell additional stock or obtain additional loans. There can be no assurance we will be successful in raising the necessary funds to execute our business plan.
We anticipate that we will incur operating losses in the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth.
To address these risks, we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continually develop and upgrade our website, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
Off-balance Sheet Arrangements
The Company has no off-balance sheet arrangements and does not anticipate entering into any such arrangements in the foreseeable future.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not applicable as we are currently considered a smaller reporting company.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Financial Statement Schedules appearing on page through of this Form 10-K.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have had no disagreements with our independent auditors on accounting or financial disclosures.
ITEM 9A
ITEM 9A (T). CONTROLS AND PROCEDURES
Our Principal Executive Officer Tom Biscardi and Principal Financial Officer, Sara Reynolds, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based on that evaluation, they have concluded that, as of July 31, 2017, our disclosure controls and procedures are designed at a reasonable assurance level and are not effective because of the identification of material weaknesses in our internal control over financial reporting which are described below. Internal controls and procedures provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control, as is defined in the Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls, including the possibility of human error and overriding of controls. Consequently, an effective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.
Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and the receipts and expenditures of company assets are made and in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
Management has undertaken an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria established in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based upon this evaluation, management concluded that our internal control over financial reporting was not effective as of July 31, 2017 due to the following material weaknesses:
Ineffective controls over period end financial disclosure and reporting process.
Limited or no segregation of duties.
Lack of functioning audit committee.
Lack of multiple levels of review over the financial reporting process.
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 the temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.
Changes in Internal Control Over Financial Reporting
We are determining what new procedures and new advisory professionals need to be put in place to assist us with the compliance process and ensure that all filings with the SEC are done pursuant to the applicable regulations. However, there were no changes in our internal control over financial reporting during the quarter ended July 31, 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The names of our director and executive officers as of July 31, 2017 and their ages, positions, and biographies are set forth below. Our executive officers are appointed by, and serve at the discretion of, our board of directors.
Executive Officers
CARMINE T. BISCARDI
The name, address, age, and position of one of our directors is set forth below:
Name and Address
Age
Position
Carmine T. Biscardi
CEO, Director
570 El Camino Real
Nr-150
Redwood City, CA. 94063
Mr. Biscardi’s experience in the research of a creature known as Bigfoot or Sasquatch and his over 20 years as an owner and manager of a marketing and consulting firm gives him experience which will be beneficial to him as a member of the Board of Directors of the corporation.
His experience in the planning and leading of expeditions as well as the production of films from such expeditions is invaluable to our business.
WORK HISTORY
Apr 2006 - Present - Searching For Bigfoot Inc. Redwood City, CA.-Director & Owner
Jan 1991 Present Tom Biscardi Associates Redwood City, CA. - Owner & Manager
Promotions. Marketing. Consulting.
C. THOMAS BISCARDI, JR.*
The name, address, age, and positions of one of our directors are set forth below:
Name and Address
Age
Position
C. Thomas Biscardi, Jr.
President, Director
112 Ironwood Road,
Middlesboro, KY. 40965
Mr. Biscardi’s sales and management experience along with Army training as a Ranger makes him an invaluable asset and firm gives him experience which will be beneficial to him on the board of directors. His experience and training allow us to plan expeditions with the thought that security has already been accounted for. His contributions to the planning of expeditions and the selection of personnel for those expeditions allow the other planners to concentrate on their field of expertise and are very beneficial to the company.
WORK EXPERIENCE
2008-Present - Food City, Middlesboro KY. -Assistant Store Manager.
* Son of Carmine T. Biscardi the Company’s President, CEO and director.
WILLIAM F. MARLETTE
The name, address, age, and positions of our Director are set forth below:
Name and Address
Age
Position
William F. Marlette
14231 Meadowrun St.
Director
San Diego CA. 92129
Mr. Marlette’s business experience including being a government contractor project manager gives him experience which will be beneficial to him as a member of the Board of Directors of the corporation. His specific field of experience as a government contractor allows him to aid us in the planning and organizing of expeditions.
WORK HISTORY
Retired - July, 2011 - Present
SARA L. REYNOLDS
The name, address, age, and positions of our Director are set forth below:
Name and Address
Age
Position
Sara L. Reynolds
6222 Raytown Trfy 352
CFO, Secretary, Treasurer, Director
Raytown, MO 64133
Work History
Owner SLR Tax & Accounting LLC 2005 to Present
Ms. Reynolds has over 14 years of experience in accounting, bookkeeping, tax preparation and planning, she has prepared financial information and footnotes for several businesses in their effort to be listed with the SEC. This experience will allow us to further develop our business plan and provide valuable insight in the SEC filings subsequent to this filing.
WORK HISTORY
Owner of SLR Tax & Accounting LLC an accounting firm that specializes in bookkeeping, tax planning, and preparation and preparation of financial information for specific SEC filings. SLR Tax & Accounting LLC was established as an accounting firm in 2005 and continues to provide these various services to many clients.
Family Relationships
Carmine T. Biscard, Jr. is the eldest son of Carmine T. Biscardi, there are no other family relationships among any of our officers or directors.
Indemnification of Directors and Officers
Our Articles of Incorporation and Bylaws both provide for the indemnification of our officers and directors to the fullest extent permitted by Nevada law.
Limitation of Liability of Directors
Pursuant to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Director's liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted in good faith and in a manner he believed to be in our best interests.
Election of Directors and Officers
Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve until the meeting of the Board of Directors following the next annual meeting of stockholders and until their successors have been elected and qualified.
Involvement in Certain Legal Proceedings
No Executive Officer or Director of the Corporation has been the subject of any Order, Judgment, or Decree of any Court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring suspending or otherwise limiting him/her from acting as an investment advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any securities.
No Executive Officer or Director of the Corporation has been convicted in any criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding which is currently pending.
No Executive Officer or Director of the Corporation is the subject of any pending legal proceedings.
Audit Committee and Financial Expert
We do not have an Audit Committee. Our director performs some of the same functions of an Audit Committee, such as: recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditor's independence, the financial statements and their audit report; and reviewing management's administration of the system of internal accounting controls. The Company does not currently have a written audit committee charter or similar document.
We have no financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our start-up operations, we believe the services of a financial expert are not warranted.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires our executive officers and directors, and persons who beneficially own more than ten percent of an issuer's common stock, which has been registered under Section 12 of the Exchange Act, to file initial reports of ownership and reports of changes in ownership with the SEC. Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and Directors, we believe that as of the date of this filing they were all current in their filings.
Corporate Governance
Nominating Committee
We do not have a Nominating Committee or Nominating Committee Charter. Our Board of Directors performs some of the functions associated with a Nominating Committee. We have elected not to have a Nominating Committee in that we are an initial-stages operating company with limited operations and resources.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation
Summary Compensation Table
Option
All Other
Total
Name and Principal Position
Year
Salary*
Bonus
Awards
Compensation
Compensation
Carmine T. Biscardi
$
$
$
$
$
CEO, Director
$
$
$
$
$
William F. Marlette
$
$
$
$
$
Director
$
$
$
$
$
C. Thomas Biscardi, Jr.
$
$
$
$
8,500
$
8,500
President, Director
$
$
$
$
$
Sara L. Reynolds.
$
$
$
$
$
CFO, Secretary, Treasurer, Director
$
$
$
$
$
Outstanding Equity Awards at Fiscal Year End. There were no outstanding equity awards as of July 31, 2017.
Board Committees
We do not currently have any committees of the Board of Directors. Additionally, due to the nature of our intended business, the Board of Directors does not foresee a need for any committees in the foreseeable future.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of November 10, 2017, certain information with respect to the beneficial ownership of shares of our common stock by: (i) each person known to us to be the beneficial owner of more than five percent (5%) of our outstanding shares of common stock, (ii) each director or nominee for director of our Company, (iii) each of the executives, and (iv) our directors and executive officers as a group. Unless otherwise indicated, the address of each shareholder is c/o our company at our principal office address:
Name and Address of
Beneficial Owner(1)(2)(3)
Shares of Common Stock /
Percent of Class
Carmine T. Biscardi, CEO, Dir.
570 El Camino Real NR-150
Redwood City, CA 94063
140,465,000
47.4%
William F. Marlette, Dir
14231 Meadowrun Street
San Diego, CA 92129
23,250,000
7.85%
Sara Reynolds, CFO, Dir
1265 Westridge Drive
Portola Valley, CA 94208
11,175,500
3.77%
C. Thomas Biscardi, Jr., President, Dir.
112 Ironwood Road
Middlesboro, KY 40965
14,750,000
4.98%
Officers and Directors as a Group
64.00%
(*) Beneficial ownership is determined in accordance with the rules of the SEC which generally attribute beneficial ownership of securities to persons who possess sole or shared voting power and/or investment power with respect to those securities. Unless otherwise indicated, voting and investment power are exercised solely by the person named above or shared with members of such person’s household. This includes any shares such person has the right to acquire within 60 days.
(**) Percent of class is calculated on the basis of the number of shares outstanding on November 10, 2017 (296,319,199).
Changes in Control
There are no arrangements, known to the Company, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Director Independence
We currently do not have any independent directors, as the term "independent" is defined in Section 803A of the NYSE Amex LLC Company Guide. Since the OTC Markets does not have rules regarding director independence, the Board makes its determination as to director independence based on the definition of "independence" as defined under the rules of the New York Stock Exchange ("NYSE") and American Stock Exchange ("Amex").
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
(1) AUDIT FEES
The audit fees charged by MaloneBailey, LLP for 2017 were $18,500 and 2016 were $6,000.
(2) AUDIT-RELATED FEES
The audit related fees charged by MaloneBailey, LLP were $0.00 for 2017 and 2016.
(3) TAX FEES
None.
(4) ALL OTHER FEES
None.
(5) AUDIT COMMITTEE POLICIES AND PROCEDURES
We do not have an audit committee.
(6) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
Not applicable.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
1. The financial statements listed in the "Index to Financial Statements" at page 30 are filed as part of this report.
2. Financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
3. Exhibits included or incorporated herein: See index to Exhibits.
(b) Exhibits
Incorporated by reference
Exhibit
Number
Exhibit Description
Filed
herewith
Form
Period
ending
Exhibit
Filing date
31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
X
32.1
Certification Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
X
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.
Bigfoot Project Investments Inc.
By: /s/ Tom Biscardi
Tom Biscardi, CFO
Date: November 14, 2017
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.
Signature
Title
Date
/s/ Tom Biscardi
Principal Executive Officer and Director
November 14, 2017
Tom Biscardi
/s/ Sara Reynolds
Sara Reynolds
Principal Financial and Director
November 14, 2017
BIGFOOT PROJECT INVESTMENTS, INC.
AUDITED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2017 AND 2016
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FINANCIAL STATEMENTS
Balance Sheets
Statements of Operations
Statements of Cash Flows
Statements of Stockholders’ Deficit
Notes to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Bigfoot Investments, Inc.
Redwood City, CA
We have audited the accompanying balance sheets of Bigfoot Investments, Inc., (the “Company”) as of July 31, 2017 and 2016, and the related statements of operations, changes in stockholders’ deficit and cash flows for the years 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 audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits 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 Bigfoot Investments, Inc. as of July 31, 2017 and 2016 and the results of its operations and its cash flows for the years 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 2 to the financial statements, the Company suffered recurring losses from operations nor does it have an established source of revenues sufficient to cover its operating costs. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/MaloneBailey, LLP
Houston, Texas
November 14, 2017
BIGFOOT PROJECT INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended July 31, 2017 and 2016
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization, Nature of Business and Trade Name
Bigfoot Project Investments Inc. (“we”, “our” the “Company”) was incorporated in the State of Nevada on November 30, 2011. The Company’s administrative office is located at 570 El Camino Real NR-150, Redwood City, CA and its fiscal year ended July 31. Since inception, the Company has been engaged in organizational efforts and the pursuit of financing. The Company was established as an entertainment investment business.
The Company’s mission is to create exciting and interesting proprietary investment projects, entertainment properties surrounding the mythology, research, and potential capture of the creature known as Bigfoot. The Company performs research in determining the existence of this elusive creature. For the past six years the research team, members of management have performed research on various expeditions investigating sightings throughout the United States and Canada.
The Company’s competitive advantage is the in-house knowledge and the advanced level of maturity of its various projects developed and currently owned by our officers and controlling shareholder. The Company will capitalize on the current projects through contractual agreements which allow the Company to continue to create media properties and establish physical locations, partnerships, and strategic alliances with other organizations to create revenue as a stand-alone business.
Basis of Presentation
These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.
Use of Estimates
The preparation of financial statements in accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. A change in managements’ estimates or assumptions could have a material impact on the Company’s financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly liquid instruments with maturity of three months or less to be cash equivalents.
Inventory Valuation
We value inventory at the lower of cost or net realizable value; cost being determined on a “first-in, first-out” basis. Our policy is to assess inventory on an annual basis, and based on our assessment there is no impairment of inventory requiring a reserve for the year ended July 31, 2017.
Website Development Cost
The Company adopted Subtopic 350-50 of the FASB Accounting Standards Codification for website development costs. Under Sections 305-50-15 and 350-50-25, the Company capitalizes costs incurred to develop a website as website development costs. They are amortized on a straight-line basis over the estimated useful lives of three (3) years.
Income Tax
The Company accounts for income taxes under ASC 740 "Income Taxes". Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Revenue Recognition
The Company recognizes revenue from the sale of goods and services in accordance with ASC 605, "Revenue Recognition." Revenue consists of proceeds and commissions from sale of DVDs and videos. Revenue is recognized only when all of the following criteria have been met:
i)Persuasive evidence for an agreement exists
ii)Goods (DVDs, videos and promotional items) have been delivered
iii)The fee is fixed or determinable
iv)Revenue is reasonably assured
Revenue is recognized in the period product is delivered where product price is fixed or determinable and collectability is reasonably assured. The Company generated revenues of $84,297 and $2,236 for the twelve months ended July 31, 2017 and 2016, respectively.
Accounts receivable
The Company routinely assesses the recoverability of receivables to determine their collectability by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer's ability to pay. The Company determines its allowance for doubtful accounts by considering such factors as the length of time balances are past due, the Company’s previous loss history, the customer’s current ability to pay its obligations to the Company and the condition of the general economy and the industry as a whole.
The Company has evaluated its accounts receivable history and determined that no allowance for doubtful accounts is required for the years ended July 31, 2017 and 2016.
Concentration risk
Substantially all of the Company's accounts receivable and revenues are with one customer. This one customer represented 100% of total accounts receivable at July 31, 2017 and 96% of total revenues for the year ended July 31, 2017.
Fair value of financial instruments
The carrying value of cash, accounts receivable, accounts payable and accrued expenses, and debt approximate their fair values because of the short-term nature of these instruments. Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.
●
Level 1 -
Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.
●
Level 2 -
Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily-available pricing sources for comparable instruments.
●
Level 3 -
Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.
The following table presents the derivative financial instruments, the Company’s only financial liabilities measured and recorded at fair value on the Company’s balance sheets on a recurring basis, and their level within the fair value hierarchy as of July 31, 2017:
The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs:
Balance at July 31, 2016
$
-
Fair value of derivative liability at issuance charged to debt discount
105,000
Fair value of derivative liability at issuance charged to derivative loss
41,210
Settlement of derivative liability
(11,782)
Unrealized derivative loss included in other expense
128,294
Balance at July 31, 2017
$
262,722
The Company evaluated its convertible notes to determine if the embedded component of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The Company determined that due to the variable number of common stock that the notes convert to, the embedded conversion option were required to be bifurcated and accounted for as a derivative liability. The fair value of the derivative liability is calculated at the time of issuance and the Company records a derivative liability for the calculated value. Changes in the fair value of the derivative liability are recorded in other income (expense) in the statements of operations. Upon conversion of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.
The Company’s derivative instruments were valued using the Lattice model which was based on a probability weighted discounted cash flow model. Assumptions used in the valuation include the following: a) underlying stock price ranging from $0.14 to $0.25; b) projected discount on the conversion price ranging from 35% to 50% with the notes effectively converting at discounts in the range of 24% to 28%; c) projected volatility of 124% to 183%; d) probabilities related to default and redemption of the notes during the term of the notes.
The Company has considered the provisions of ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in each debenture could result in the note principal being converted to a variable number of the Company’s common shares.
Loss per Common Share
Basic and diluted net loss per common share has been calculated by dividing the net loss available to common stockholders by the basic and diluted weighted average number of common shares outstanding. Common stock equivalents pertaining to convertible debt were not included in the computation of diluted net loss per common share because the effect would have been anti-dilutive due to the net loss for the years ended July 31, 2017 and 2016.
Recent Account Pronouncements
In May 2014, FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers." This ASU and related amendments supersedes the revenue recognition requirements in "Accounting Standard Codification 605 - Revenue Recognition" and most industry-specific guidance. The standard requires that entities recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal 2019 for the Company), and for interim periods within that fiscal year. The Company is in the data aggregation and quantification phase of its review of this new standard, and is working to assess the impact and our approach towards adopting this ASU.
In August 2016, the FASB issued an ASU regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The update addresses eight specific cash flow items whose objective is to reduce existing diversity in practice. This ASU is effective for interim and annual periods after December 15, 2017. The adoption of this ASU is not expected to have a material impact on the financial position and results of operations of the Company.
In January 2017, the FASB issued an ASU regarding how goodwill is tested annually. This ASU will simplify the measurement of goodwill which will reduce cost and complexity of the evaluating process. This ASU is effective beginning after December 15, 2019. The adoption of this ASU will not have a material impact on the financial position and results of operations of the Company.
In March 2017, the FASB issued an ASU in order to shorten the amortization period for certain callable debt securities held at a premium. This ASU is effective for interim and annual periods after December 15, 2018. As the Company already uses the earliest call date for debt securities, the adoption of this ASU is not expected to have a material impact on the financial position and results of operations of the Company.
In March 2017, the FASB issued an ASU to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost in the financial statements. This ASU will be effective for interim and annual periods after December 15, 2017.
The amendments in this update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently assessing the potential effects on our financial condition and results of operations.
NOTE 2 - GOING CONCERN
The Company’s financial statements are prepared using accounting principles generally accepted in the United States of American applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has incurred recurring losses, does not have significant cash or other current assets, nor does it have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. These factors raise substantial doubt about our ability to continue as a going concern.
In the coming year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital.
Historically, it has mostly relied upon internally generated funds such as shareholder loans and advances to finance its operation and growth. Management may raise additional capital by future public or private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern
NOTE 3 - ADVANCE FROM SHAREHOLDERS
For the twelve months ended July 31, 2017, additional advances for shareholders were $69,125. The Company made payments on these advances amounting to $26,484 and $8,877 for the twelve months ended July 31, 2017 and July 31, 2016, respectively. For the twelve months ended July 31, 2016, additional advances from shareholders were $26,843. These advances bear no interest and are due on demand. Total advances from shareholders as of July 31, 2017 and 2017 were $60,322 and $17,681, respectively.
NOTE 4 - NOTE PAYABLE - RELATED PARTY
In January 2013, Bigfoot Project Investments, Inc. executed a promissory note in the amount of $484,029 as part of the asset transfer agreement for the transfer of all assets held by Searching for Bigfoot, Inc. In August 2013, the Company increased the balance of the promissory note by $489 to add an asset that was not included in the original transfer. The note is subject to annual interest of 4% and the unpaid principal and the accrued interest are payable in full on January 31, 2018.
Monthly payments are not required on the note; however, the note does contain a prepayment clause that allows for payments to be made prior to the due date with no detrimental effects. The Company was able to pay $12,148 toward the principal of the loan during the year ended July 31, 2017. As of July 31, 2017 and 2016, the outstanding balance on the note was $472,370 and $484,518, respectively.
Interest expense for the years ended July 31, 2017 and 2016 was $19,244 and $19,362, respectively.
NOTE 5 - CAPITAL STOCK
The holders of the Company’s common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends at 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 the 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.
The Company has 223,397,000 and 208,717,000 shares of common stock issued and outstanding as of July 31, 2017 and 2016, respectively.
In May 2016, 1,227,000 shares of common stock were sold for $120,500 pursuant to an S1 registration (the Offering). The Company received cash payments of $60,500. An additional payment of $60,000 for shares in the offering was paid directly to a shareholder to reimburse advances previously made to the Company. The offering closed July 21, 2016.
On November 26, 2016 the Company entered into a rescission and release agreement with the Advisors (see Note 9 - Advisory Agreements) whereby the Company agreed to issue 900,000 and 200,000 shares of its common stock as full satisfaction of the Advisory Agreements.
On November 18, 2016, the Company entered into an agreement with FMW Media Works (the “Advisors”) to provide advisory services to the company. Compensation under this agreement is in the form of stock in the amount of 7,500,000 shares. FMX Media Works is required to provide management consulting, business development services, strategic planning, marketing and public relations.
On December 7, 2016, the Company entered into agreements with PAG Consulting and PR Consulting (the “Advisors”) to provide advisory services to the Company. Compensation under this agreement is in the form of stock of 3,000,000 shares to each company. The Advisors are required to provide management consulting, business development services, strategic planning, marketing and public relations.
In May, 2017, the Company authorized the issuance of 3,000,000 shares each to PAG Consulting and PR Consulting as compensation for services performed.
The Company recognized stock compensation of $2,500,000 pursuant to the above advisory agreements for the year ended July 31, 2017.
The Company issued 80,000 shares for the EMA convertible debt resulting in a decrease in the principal in the amount of $2,450.
NOTE 6 - DISTRIBUTION AGREEMENTS
The Company entered into a Distribution Agreement on September 2, 2011 with the Bosko Group providing them a non-exclusive right to market the sales of its DVD’s. The Distribution Agreement requires the Company to pay the Bosko Group ten percent (10%) of the selling price of the DVD’s sold. This agreement remained in effect for a period of 4 years and has been automatically renewed for an additional 4 years with no limit on the number of times the agreement may be automatically renewed, unless either party gives notice to the other of its desire to terminate the Agreement at least sixty (60) days before expiration of the original or renewal term.
On May 2017, the Company entered into two separate agreements (the “Re-Release”) with The Bosko Group LLC (the “Distributor”) to provide distribution and promotional services to the Company. The terms of the agreements provide for the following.
a.Compensation to the Company for the Re-Release will be based on projected gross sales range and royalties for six existing DVD documentaries which will be offered into all distribution markets as a series with a new introduction narrated by Tom Biscardi.
b.Compensation to the Company for the Distribution of new feature-length films is based on past performance of previous productions with up-front funding and projected royalties over all distribution channels. The Company completed production of the first of the new feature-length films in July 2017 and recognized revenues of $81,000 during the year ended July 31, 2017.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company could become a party to various legal actions arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. As of the date of this report there are no material pending legal proceedings to which the Company is a party or of which any of their property is the subject, nor are there any such proceedings known to be contemplated by governmental authorities.
NOTE 8 - INCOME TAXES
Deferred taxes, estimated at 39% of taxable incomes, are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forward and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax assets consist of the following components as of July 31, 2017 and 2016:
July 31, 2017
July 31, 2016
Deferred tax assets:
Net operating loss carryover
$
2,932,562
$
345,362
Valuation allowance
(2,932,562)
(345,362)
Net deferred tax asset
$
-
$
-
A reconciliation of income taxes computed at the 39% statutory rate to the income tax recorded is as follows:
July 31, 2017
July 31, 2016
Net provision for federal income taxes (benefits):
Net operating loss carryover
$
1,143,699
$
134,691
Valuation allowance
(1,143,699)
(134,691)
$
-
$
-
As of July 31, 2017, the Company did not pay any income taxes nor have they paid or accrued any taxes from inception through July 31, 2017.
The net federal loss carry forward will begin to expire in 2034. No tax benefit has been reported in the July 31, 2017 financial statements since the potential tax benefit is offset by a valuation allowance in the same amount. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. The Company has filed and extension for the year ended July 31, 2017 and anticipates filing the return within the extension period. All of the Company’s income tax years remained open for examination by taxing authorities.
NOTE 9 - ADVISORY AGREEMENTS
On May 1, 2016, the Company entered into two agreements with Surf Financial and William Hiney (collectively, the “Advisors”) to provide advisory services to the Company. Compensation under each agreement was contingent upon each Advisor’s performance for an initial six-month period expiring on November 2, 2016 (the “Contingency Period”).
Specifically, under each agreement, respectively, the Advisors were required to provide management consulting, business development services, strategic planning, marketing and public relations. If in the initial six-month contingent period, each Advisor was required to provide its or his best efforts to provide the advisory services described in each agreement; otherwise, the Company in its sole and absolute discretion could unilaterally cancel the agreements at the end of the Contingency Period and each agreement would be automatically null and void thereby terminating entirely the Advisors’ right to compensation. As compensation, the Company shall issue to the Advisors 4,000,000 shares and 1,000,000 shares, respectively, of restricted common stock, subject to rescission and redemption at the end of the Contingency Period by the Company. The value placed upon the shares was $0.10 per share as this was considered fair value of the Company’s common stock based upon its recently completed S-1 offering registered with the SEC. Fair value of the shares to be issued pursuant to the agreements was $500,000. On November 26, 2016 the Company entered into a rescission and release agreement with the Advisors whereby the Company agreed to issue 900,000 and 200,000 shares of its common stock as full satisfaction of the Advisory Agreements. The Company recognized stock compensation in the amount of $250,000 which represents the fair value of the vested shares from May 1, 2016 through July 31, 2016 and recognized the remaining $250,000 of stock compensation during the year ended July 31, 2017.
On December 7, 2016, the Company entered into agreements with PAG Consulting and PR Consulting (the “Advisors”) to provide advisory services to the company. Compensation under this agreement is in the form of stock in the amount of 6,000,000 shares. The Advisors are required to provide management consulting, business development services, strategic planning, marketing and public relations.
In May, 2017, the Company issued 3,000,000 shares each to PAG Consulting and PR Consulting for services performed.
The Company recognized stock compensation of $2,500,000 pursuant to the advisory agreements for the year ended July 31, 2017.
NOTE 10 - CONVERTIBLE NOTES
On January 19, 2017, the Company issued a convertible promissory note in the amount of $62,500 to EMA Financial, LLC, a Delaware limited liability company. This convertible note is due and payable January 19, 2018, has an interest rate of 10% and is convertible to common stock of the Company at a conversion price equal to the lower of: (i) the closing sale price of the common stock on the principal market on the trading immediately preceding the closing date of this note, and (ii) 50% of either the lowest sale price for the common stock on the principal market during the twenty-five (25) consecutive trading days immediately preceding the conversion date or the closing bid price. The note may be prepaid at 135% - 145% of outstanding principal balance. During the year ended July 31, 2017, 80,000 shares of stock were converted for a reduction in the principal balance of $2,450. The note became convertible on May 23, 2017 and the variable conversion feature was accounted for as a derivative liability in accordance with ASC 815.
On February 27, 2017, the Company issued a convertible promissory note in the amount of $62,500 to Auctus Fund LLC, a Delaware limited liability company. This convertible note is due and payable on November 18, 2017 with interest of 10% per annum. This note is convertible at the election of Auctus Fund, LLC after the 120 holding period has expired. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 24% per annum and the note becomes immediately due and payable. Should an event of default occur, the Company is liable to pay 150% of the then outstanding principal and interest. The note agreement contains covenants requiring Auctus Fund’s written consent for certain activities not in existence or not committed to by the Company on the issuance date of the note, as follows: dividend distributions in cash or shares, stock repurchases, borrowings, sale of assets, certain advances and loans in excess of $100,000, and certain guarantees with respect to preservation of existence of the Company and non-circumvention. This note became convertible on June 27, 2017 and the variable conversion feature was accounted for as a derivative liability in accordance with ASC 815.
Outstanding note principal and interest accrued thereon can be converted in whole, or in part, at any time by Acutus Fund, LLC after the issuance date into an equivalent of the Company’s common stock at a conversion price equal to the lower of: (i) 50% multiplied by the lowest trading price of the common stock during the previous twenty-five (25) trading day period prior to the date of the note and (ii) 50% of the lowest trading price of the common stock during the twenty-five (25) trading day period prior to the conversion date. The Company may prepay the amounts outstanding to Auctus Fund at any time up to the 180th day following the issue date of this note by making a payment to the note holder of an amount in cash equal to 135% to 145%, multiplied by the sum of: (w) the then outstanding principal amount of this note plus (x) accrued and unpaid interest on the unpaid principal amount of this note plus (y) default interest, depending on the time of prepayment.
In connection with the above notes, the Company paid deferred financing costs totaling to $20,000 that were recorded as a discount to the notes. The Company also recognized a debt discount of $105,000 resulting from the embedded conversion option derivative liability. The debt discount is amortized over the term of the note. Total amortization expense for the year ended July 31, 2017 amounted to $13,209. Unamortized discount as of July 31, 2017 amounted to $111,791.
NOTE 11 - SUBSEQUENT EVENTS
On August 28, 2017, the Company issued a convertible promissory note in the amount of $60,000 to Power Up Lending Group LTD, a Virginia corporation. This convertible note is due and payable June 10, 2018, has an interest rate of 12% and is convertible to common stock of the Company, beginning from 180 days following the date of the note, at a conversion price equal to 62% of the average of the lowest trading price of the common stock during the fifteen (15) trading day period prior to the conversion date. The note may be prepaid at any time up to 180th day following the issue date of the note for an amount equal to 115% - 140% of outstanding balance plus unpaid interest.
The Board authorized stock compensation for Directors of the Company in the August 27, 2017 Directors meeting. The stock was issued on September 13, 2017. Total number of shares issued for director compensation was twenty million (20,000,000) shares to CEO, Tom Biscardi, ten million (10,000,000) shares to President, Tommy Biscardi, ten million (10,000,000) shares to CFO, Sara Reynolds and ten million (10,000,000) shares to Director, William Marlette for a total of fifty million shares (50,000,000). The Board also authorized stock compensation for the Company’s legal representative The Krueger Group in the amount of ten million shares (10,000,000).
On August 28, 2017, EMA Financial converted 1,000,000 shares of common stock for a reduction in the principal amount due of $14,040.
On October 6, 2017, Auctus Fund converted 8,922,199 shares of common stock for a reduction in the principal amount due of $18,717 and settlement of unpaid interest of $3,767.
On October 26, 2017, EMA Financial converted 3,000,000 shares of common stock for a principal amount due of $2,715.
The Company is in default of its note with EMA as of August 28, 2017 and we are in negotiations with EMA to pay off this note.