10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ___________

Commission File # 000-52727

ELRAY RESOURCES, INC.

(Exact name of small business issuer as specified in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

98-0526438

(IRS Employer Identification Number)

3651 Lindell Road, Suite D, Las Vegas, NV 89103

(Address of principal executive offices)

(917) 775-9689

(Issuer’s telephone number)

Indicate by check mark whether the registrant(1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day. x Yes    ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨ Yes    x No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. The issuer had 1,411,474,231 shares of common stock issued and outstanding as of August 8, 2017.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)		3
	CONSOLIDATED BALANCE SHEETS (UNAUDITED)		3
	CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)		4
	CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)		5
	NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)		6
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION		17
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		20
ITEM 4.	CONTROLS AND PROCEDURES		20
PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS		21
ITEM 1A.	RISK FACTORS		21
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		21
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		21
ITEM 4.	MINE SAFETY DISCLOSURES		21
ITEM 5.	OTHER INFORMATION		21
ITEM 6.	EXHIBITS		22
SIGNATURES			23

   

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ELRAY RESOURCES, INC. Consolidated Balance Sheets (Unaudited)
	June 30,			December 31,
	2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	19,781		$	18,297
Accounts receivable – Trade – related parties		74,148			31,352
Note receivable – related party		-			15,195
Prepaid expenses		14,357			13,592
Total current assents		108,286			78,436
Rent deposit		7,535			7,535
Other assets		5,000			5,000
Total assets	$	120,821		$	90,971
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$	1,745,511		$	1,529,746
Accounts payable – related parties		2,267,798			1,742,315
Advances from shareholders		59,391			59,391
Other payable – related party		34,824			-
Settlement payable		2,162,159			2,162,159
Notes payable		48,509			163,350
Convertible notes payable, net of discounts		3,174,913			3,135,011
Derivative liabilities - note conversion feature		432,681			1,173,213
Total liabilities		9,925,786			9,965,185
Commitments and contingencies
Shareholders' deficit:
Series A preferred stock, par value $0.001, 300,000,000 shares authorized, 0 issued and outstanding		-			-
Series B preferred stock, par value $0.001, 280,000,000 shares authorized, 192,000,000 issued and outstanding		192,000			192,000
Series C preferred stock, par value $0.001, 10,000,000 shares authorized, 7,083,333 shares issued and outstanding		7,083			7,083
Common stock, par value $0.001, 2,500,000,000 shares authorized, 1,411,474,231 and 1,222,967,493 shares issued and outstanding, respectively		1,411,474			1,222,967
Additional paid-in capital		16,563,608			16,735,050
Subscriptions receivable		(75,672	)		(75,672	)
Accumulated deficit		(27,903,458	)		(27,955,642	)
Total shareholders' deficit		(9,804,965	)		(9,874,214	)
Total liabilities and shareholders' deficit	$	120,821		$	90,971

See accompanying notes to unaudited consolidated financial statements.

 

3

ELRAY RESOURCES, INC

Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016
Revenues	$	167,794		$	1,703,372		$	324,128		$	3,080,304
Operating expenses:
Software usage costs		-			1,242,131			-			2,398,386
General and administrative		353,546			453,163			616,480			838,365
Total operating expenses		353,546			1,695,294			616,480			3,236,751
Income (loss) from operations		(185,752	)		8,078			(292,352	)		(156,447	)
Other income (expense):
Interest expense		(180,484	)		(236,547	)		(388,293	)		(462,802	)
Unrealized gain (loss) on change in fair value of derivative liabilities – note conversion feature		(123	)		186,659			732,829			373,622
Gain on settlement of accounts payable and notes payable		-			25,611			-			19,875
Total other income (expense)		(180,607	)		(24,277	)		344,536			(69,305	)
Net income (loss)	$	(366,359	)	$	(16,199	)	$	52,184		$	(225,752	)
Net earnings (loss) per common share – basic	$	(0.00	)	$	(0.00	)	$	0.00		$	(0.00	)
Net earnings (loss) per common share – diluted	$	(0.00	)	$	(0.00	)	$	0.00		$	(0.00	)
Weighted average number of common shares outstanding - basic		1,370,904,722			642,368,207			1,303,422,568			369,131,318
Weighted average number of common shares outstanding - diluted		1,370,904,722			642,368,207			37,376,484,930			369,131,318

See accompanying notes to unaudited consolidated financial statements.

 

4

ELRAY RESOURCES, INC.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Six Months Ended June 30,
	2017			2016
Cash flows from operating activities:
Net income (loss)	$	52,184		$	(225,752	)
Adjustments to reconcile net loss to cash provided by operations activities:
Amortization of debt discount		47,478			375,708
Unrealized gain on change in fair value of derivative liabilities		(732,829	)		(373,622	)
Loss on settlement of accounts payable and notes payable		-			(19,875	)
Changes in operating assets and liabilities:
Accounts receivable		-			(1,420,269	)
Accounts receivable – related parties		(42,796	)		-
Prepaid expenses		(765	)		(2,230	)
Accounts payable and accrued liabilities		217,551			114,081
Accounts payable – related parties		525,483			1,803,409
Net cash provided by operating activities		66,306			251,450
Cash flows from investing activities:
Investment in note receivable - related party		15,195			-
Net cash provided by investing activities		15,195			-
Cash flows from financing activities:
Proceeds from short-term note payable – related party		34,824			60,000
Repayment of short-term notes payable		(114,841	)		(128,024	)
Advances from related party		-			900
Net cash used in financing activities		(80,017	)		(67,124	)
Net change in cash and cash equivalents		1,484			184,326
Cash and cash equivalents at beginning of period		18,297			111,133
Cash and cash equivalents at end of period	$	19,781		$	295,459
Supplemental disclosure of cash flows information:
Cash paid for interest	$	14,790		$	42,422
Cash paid for income taxes	$	-		$	-
Non-cash investing and financing activities:
Common stock issued for conversion of debt	$	9,362		$	137,703

See accompanying notes to unaudited consolidated financial statements.

 

5

ELRAY RESOURCES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Elray Resources, Inc. ("Elray" or the "Company"), a Nevada Company formed on December 13, 2006, has been providing marketing and support for online gaming operations. The Company maintains its administrative office in Australia and its gaming operations is currently targeting Asian market.

The accompanying unaudited interim consolidated financial statements of Elray Resources, Inc. (“Elray” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report for the year ended December 31, 2016 on Form 10-K filed on April 12, 2017.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year ended December 31, 2016 have been omitted.

Use of Estimates

The preparation of financial statements in conformity with 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 at the date of the balance sheet. Actual results could differ from those estimates.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current period presentation.

Cash and Cash Equivalents

The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents.

Allowance for doubtful accounts

The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. The

Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. As of June 30, 2017 and December 31, 2016, allowances for doubtful accounts was $5,521.

Long Lived Assets

Long-lived assets to be held and used or disposed of other than by sale are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used or disposed of other than by sale are recognized based on the fair value of the asset. Long-lived assets to be disposed of by sale are reported at the lower of its carrying amount or fair value less cost to sell.

 

6

Intangible Assets

Intangible assets consist of expenditures for domain names and certain intellectual properties. The intangible assets are recorded at cost and amortized over its estimated useful life of 3 years.

Derivative Instruments

Derivatives are measured at their fair value on the balance sheet. In determining the appropriate fair value, the Company uses the Black-Scholes-Merton option pricing model. Changes in fair value are recorded in the statement of operations.

Debt Discount

Debt discount is amortized over the term of the related debt using the effective interest rate method.

Revenues

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Prior to July 31, 2016, the Company recorded revenue at gross charge to its customers as the Company was the principal of the transactions. Starting August 1, 2016, due to compliance and legal environmental concerns, the Company modified its business model and changed its role to an agent. Therefore, revenues recorded after August 1, 2016 are presented net with software usage costs.

Income Taxes

Deferred income taxes reflect the net effect of (a) temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of operations because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry forward has been recognized, as it is not deemed likely to be realized.

Earnings (Loss) Per Common Share

Basic net earnings (loss) per common share are computed by dividing net earnings (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

The dilutive effect of outstanding stock options and warrants is reflected in diluted earnings per share by application of the treasury stock method. The dilutive effect of outstanding convertible securities is reflected in diluted earnings per share by application of the if-converted method.

7

The following is a reconciliation of basic and diluted earnings (loss) per common share for the three and six months ended 2017 and 2016:

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2017			2016			2017		2016
Basic earnings (loss) per common share
Numerator:
Net income (loss) available to common shareholders	$	(366,359	)	$	(16,199	)	$	52,184	$	(225,752	)
Denominator:
Weighted average common shares outstanding		1,370,904,722			642,368,207			1,303,422,568		369,131,318
Basic earnings (loss) per common share	$	(0.00	)	$	(0.00	)	$	0.00	$	(0.00	)
Diluted earnings (loss) per common share
Numerator:
Net income (loss) available to common shareholders	$	(366,359	)	$	(16,199	)	$	52,184	$	(225,752	)
Add convertible debt interest		184,282			-			324,515		-
Net income (loss) available to common shareholders	$	(182,077	)	$	(16,199	)	$	376,699	$	(225,752	)
Denominator:
Weighted average common shares outstanding		1,370,904,722			642,368,207			1,303,422,568		369,131,318
Preferred shares		2,362			-			2,362		-
Convertible debt		36,073,060,000			-			36,073,060,000		-
Adjusted weighted average common shares outstanding		37,443,967,084			642,368,207			37,376,484,930		369,131,318
Diluted earnings (loss) per common share	$	(0.00	)	$	(0.00	)		0.00		(0.00	)

For the three and six months ended June 30, 2016 fully diluted earnings per share excludes notes convertible to 36,555,562,222 common shares and preferred stock convertible to 2,362 common shares, because their inclusion would be anti-dilutive.

Subsequent Events

Elray evaluated subsequent events through the date these financial statements were issued for disclosure purposes.

Recent Accounting Pronouncements

In May 2014, a pronouncement was issued that creates common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards. The new guidance supersedes most preexisting revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with an option to adopt the standard one year earlier. The new standard is to be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of the new pronouncement on its financial statements.

In February 2016, a pronouncement was issued that creates new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early application permitted. The new standard is to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the new pronouncement on its financial statements.

Elray’s management does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.

 

8

NOTE 2 – GOING CONCERN

The accompanying unaudited consolidated financial statements of Elray have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had a negative working capital of $9,817,500 at June 30, 2017. The factor raises substantial doubt regarding the Company’s ability to continue as a going concern. Without realization of additional capital, it would be unlikely for Elray to continue as a going concern. Elray's management plans on raising cash from public or private debt, on an as needed basis, and in the longer term, revenues from the gambling business. Elray's ability to continue as a going concern is dependent on these additional cash financings, and, ultimately, upon achieving profitable operations through the development of its gambling business.

NOTE 3 – SETTLEMENT PAYABLE

On December 20, 2013, the Company entered into a settlement agreement with Tarpon Bay Partners LLC (“Tarpon”) whereby Tarpon acquired certain notes and accounts payable against the Company in the amount of $2,656,214. Pursuant to the agreement, the Company and Tarpon submitted the settlement agreement to the Circuit Court of the Second Judicial Circuit, Leon County, Florida for a hearing on the fairness of the agreement and the exemption from registration under the Securities Act of 1933 for the shares that will be issued to Tarpon for resale (“Settlement Shares”). 75% of the proceeds less all applicable fees and charges from the resale of the Settlement Shares will be remitted to the original claim holders of the Company (“Remittance Amount”). The Company agreed to issue sufficient shares to generate proceeds such that the aggregate Remittance Amount equals $2,656,214. The settlement agreement was effective on January 27, 2014 when the court granted approval.

During the six months ended June 30, 2016, the Company issued Tarpon 5,136,000 common shares. Net proceeds from the sales amounted to $933 was remitted to the original claim holders. As of June 30, 2017, the Company has settlement payable of $2,162,159.

NOTE 4 – NOTES PAYABLE

Notes payable

Notes payable at June 30, 2017 and December 31, 2016 consisted of the following:

	Final Maturity	Interest Rate	June 30, 2017		December 31, 2016
Morchester International Limited	July 14, 2012	15%	$	35,429	$	35,429
Morchester International Limited	July 14, 2012	8%		10,000		10,000
PowerUp Lending Group, Ltd	February 22, 2017	33%		-		13,934
Auctus Private Equity Fund, LLC	June 27, 2017	N/A		-		25,758
PowerUp Lending Group, Ltd	May 6, 2017	46%		-		42,999
PowerUp Lending Group, Ltd	July 20, 2017	46%		3,080		35,230
Total			$	48,509	$	163,350

On December 9, 2011, Elray entered into an Amended Splitrock Agreement whereby the Company acquired certain assets and liabilities of Splitrock. As part of the liabilities assumed in terms of the Amended Splitrock Agreement, the Company assumed notes payable of $292,929 bearing interest of 8% or 15% per annum. On January 27, 2014, the court granted an approval of the settlement agreement with Tarpon whereby the Company would issue shares to Tarpon for resale to pay off certain liabilities. As a result, principal of $247,500 and associated accrued interest acquired by Tarpon were reclassified to settlement payable. The remaining notes issued to Morchester International Limited not purchased by Tarpon are currently in default. The default had no effect on the notes’ interest rate.

 

9

On May 6, 2016, the Company entered into a third loan agreement with PowerUp for $60,000. Total repayment amount for the loan is $76,000. The loan is payable daily at $360 and secured by all of the Company’s assets. As of June 30, 2017, the loan has been paid off.

On June 27, 2016, the Company reached a settlement agreement with Auctus. Pursuant to the settlement agreement, the Company agreed to pay $61,819 in full and final settlement of all outstanding convertible notes and accrued interest. During the six months ended June 30, 2017, the Company made payments totaling $25,758. As of June 30, 2017, the loan has been paid off.

On July 28, 2016, the Company entered into a fourth loan agreement with PowerUp for $75,000. Total repayment amount for the loan is $95,250. The loan is payable daily at $451 and secured by all of the Company’s assets. As of June 30, 2017, the loan has been paid off.

On September 14, 2016, the Company entered into a fifth loan agreement with PowerUp for $50,000. Total repayment amount for the loan is $63,500. The loan is payable daily at $301 and secured by all of the Company’s assets. As of June 30, 2017, balance of this note was $3,080.

Convertible notes payable

Convertible notes payable, at June 30, 2017 and December 31, 2016, consisted of the following:

	Interest Rate	June 30, 2017		December 31, 2016
JSJ Investments, Inc.	10%~12%	$	128,853	$	128,853
LG Capital Funding, LLC	8%		4,264		8,707
WHC Capital, LLC	12%		116,936		116,936
Beaufort Capital Partners, LLC	12%		10,966		10,966
Tangiers Investment Group, LLC	0%~10%		48,393		48,394
GSM Fund Management, LLC	12%		35,309		38,442
Microcap Equity Group, LLC	10%		18,892		18,892
Virtual Technology Group, Ltd	24%		481,500		481,500
Gold Globe Investments Ltd	24%		2,324,000		2,324,000
Vista Capital Investments, LLC.	12%		5,800		5,800
Subtotal			3,174,913		3,182,489
Debt discount			-		(47,478	)
Total		$	3,174,913	$	3,135,011

JSJ Investments, Inc.

On May 31, 2013, the Company entered into a convertible promissory note with JSJ Investments, Inc. (“JSJ”) for $50,000. The note matured on December 2, 2013. The note holder has the option to convert the note to common shares in the Company at a discount of 50% of the average closing price over the last 120 days prior to conversion, or the average closing price over the last seven days prior to conversion. As of June 30, 2017, the remaining principal of $10,670 has not been converted. The note is currently in default. The default had no effect on the note’s interest rate.

On August 21, 2014, the Company entered into a convertible promissory note with JSJ for $50,000 cash. The note matured on February 21, 2015. Upon the maturity, the note has a cash redemption premium of 150% of the principal amount. The note is convertible to the Company’s common shares at a discount of 60% of the average of the three lowest bids on the twenty days before the date this note is executed, or 60% of the average of the three lowest bids during the twenty trading days preceding the delivery of any conversion notice, whichever is lower. The note is currently in default and has a default interest rate of 20% per annum. As of June 30, 2017, balance of this note was $45,560.

 

10

On January 20, 2015, the Company entered into a convertible promissory note with JSJ for $40,000. The note bears interest at 12% and matured on July 20, 2015. Upon the maturity, the note has a cash redemption premium of 150% of the principal amount. The note is convertible to the Company’s common shares at 40% of the lowest trading price on the twenty days before the date this note is executed, or 40% of the lowest trading price during the twenty trading days preceding the delivery of any conversion notice, whichever is lower. The note is currently in default. The default had no effect on the note’s interest rate. As of June 30, 2017, balance of this note was $40,000.

On January 20, 2015, the Company entered into a convertible promissory note with JSJ for $60,000, which was issued in exchange for a portion of the promissory note issued to VTG on January 23, 2014. The note bears interest at 12% and matured on January 20, 2015. JSJ has the right to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest trading price on the twenty days before the date this note is executed, or 50% of the lowest trading price during the twenty trading days preceding the delivery of any conversion notice, whichever is lower. The Company recorded a loss on extinguishment of debt of $441 related to the exchange. The note is currently in default. The default had no effect on the note’s interest rate. As of June 30, 2017, balance of this note was $32,623.

LG Capital Funding, LLC

On November 10, 2014, the Company entered into a convertible promissory note with LG for $37,000. The note matured on November 10, 2015. LG has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the average lowest three trading prices during the fifteen trading days prior to the conversion date. During the six months ended June 30, 2017, the Company issued 124,559,400 shares of common stock for the conversion of this note in the amount of $4,443 and accrued interest of $1,785. As of June 30, 2017, balance of this note was $4,264. The note is currently in default and has a default interest rate of 24% per annum.

WHC Capital, LLC

On September 23, 2014, the Company entered into a convertible promissory note with WHC Capital, LLC (“WHC”) for $75,000. The note bears interest at 12% and matured on September 23, 2015. WHC has the right at any time during the period beginning on the date of this note to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest intra-day trading price during the fifteen trading days prior to the conversion date. On September 23, 2015, the Company failed to repay the outstanding balance of this note and a penalty of $41,978 was added to the outstanding balance pursuant to the note terms. As of June 30, 2017, balance of this note was $116,936. This note is currently in default and has a default interest rate of 22% per annum.

Beaufort Capital Partners, LLC

On September 2, 2014, the Company entered into a convertible promissory note with Beaufort Capital Partners, LLC (“Beaufort”) for $21,000. The note matured on March 2, 2015. Beaufort has the right after the maturity date to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest trading prices during the fifteen trading days prior to the conversion date. Under certain conditions, the conversion price would be reset to $0.0001 or 65% off the lowest price of the previous five trading days. As of June 30, 2017, balance of this note was $10,966. This note is currently in default. The default had no effect on the note’s interest rate.

Tangiers Investment Group, LLC

On October 13, 2014, the Company entered into a convertible promissory note with Tangiers Investment Group LLC (“Tangiers”) for $55,000. The note matured on October 13, 2015. Tangiers has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 45% of the lowest trading prices during the twenty trading days prior to the conversion date. As of June 30, 2017, balance of this note was $15,393. This note is currently and has a default interest rate of 20% per annum.

On October 13, 2014, the Company entered into a convertible promissory note with Tangiers for $33,000. The note bears interest at 10% and matured on October 13, 2015. Tangiers has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 45% of the lowest trading prices during the twenty trading days prior to the conversion date. This note is currently in default and has a default interest rate of 20% per annum.

 

11

GSM Fund Management LLC

On January 30, 2015, the Company entered into an assignment and modification agreement to assign $62,500 of the convertible promissory note of VTG dated January 23, 2014 to GSM Fund Management LLC (“GSM”). The note bears interest at 12% and matured on January 30, 2016. GSM has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest closing bid price in the 15 trading days prior to the conversion date. The Company recorded a loss on extinguishment of debt of $52,364 related to the exchange. During the six months ended June 30, 2017, the Company issued 63,947,338 shares of common stock for the conversion of this note in the amount of $3,133. As of June 30, 2017, balance of this note was $35,309. The note is currently in default and has a default interest rate of 18%.

Microcap Equity Group, LLC

On February 23, 2015, the Company entered into a convertible promissory note with Microcap Equity Group LLC ("Microcap") for $20,000, which was issued in exchange for a portion of the promissory note issued to VTG on January 23, 2014. The note matured on January 23, 2017. Microcap has the right to convert the balance outstanding into the Company’s common stock at a rate equal to 40% of the lower of the lowest bid price during the thirty trading days prior to the conversion date, or the lowest bid price on the day that the converted shares are cleared for physical delivery. The Company recorded a loss on extinguishment of debt of $28,213 related to the exchange. As of June 30, 2017, balance of this note was $18,892. The note became in default on January 23, 2017. The default had no effect on the note’s interest rate.

Virtual Technology Group, Ltd

On January 23, 2014, the Company entered into a convertible promissory note with VTG for $1,500,000. VTG has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 100% of the average of the closing bid prices for the seven trading days prior to the conversion date when the Company’s shares are traded in the OTCQB or during the ten trading days prior to the conversion date when the Company’s shares are traded on another other exchange. On November 10, 2014, $50,000 of this note was replaced with a note issued to LG. On January 20, January 23 and January 30, 2015, $60,000, $20,000 and $62,500 of this note were replaced with notes issued to JSJ, Microcap and GSM. As of June 30, 2017, balance of this note was $481,500. The note became in default on January 23, 2017 and has a default interest rate of 24% per annum.

Gold Globe Investments Ltd

On January 23, 2014, the Company entered into a convertible promissory note with GGIL for $2,800,000. GGIL has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 100% of the average of the lowest three trading prices during the seven trading days prior to the conversion date when the Company’s shares are traded in the OTCQB or during the ten trading days prior to the conversion date when the Company’s shares are traded on another exchange. On December 3, 2014, $45,000 of this note was replaced with a note issued to Tangiers. As of June 30, 2017, balance of this note was $2,324,000. The note became in default on January 23, 2017 and has a default interest rate of 24% per annum.

Vista Capital Investments, LLC.

On April 15, 2014, the Company entered into a convertible promissory note with Vista Capital Investments, LLC (“Vista”) for $250,000. The note has an original issuance discount of $25,000. The note matures 2 years from the date of each payment of the principal from Vista. In the event that the note remains unpaid at maturity date, the outstanding balance shall immediately increase to 120% of the outstanding balance. Vista has the right to convert the outstanding balance into the Company’s common stock at a rate equal to the lesser of $0.008 per share or 60% of the lowest trade occurring during the twenty-five consecutive trading days preceding the conversion date. Due to certain events that occurred during 2014, the conversion price has been reset to $0.005 per share or 50% of the lowest trade occurring during the twenty-five consecutive trading days preceding the conversion date. Pursuant to the agreement, if the conversion price calculated under this agreement is less than $0.01 per share, the principal amount outstanding shall increase by $10,000 (“Sub-Penny”). $25,000 net proceeds were received on April 23, 2014. The remaining fund of this note has not been received. As of June 30, 2017, balance of this note was $5,800 which matured on April 15, 2016. The note is currently in default. The default had no effect on the note’s interest rate.

 

12

Debt Discount

The table below presents the changes of the debt discount during the six months ended June 30, 2017:

	Amount
December 31, 2016	$	47,478
Amortization		(47,478	)
June 30, 2017	$	-

Loans from shareholders

On September 5, 2008, Elmside Pty Ltd, a company related to a former director, agreed to an interest free loan of $55,991 to the Company on an as-needed basis to fund the business operations and expenses of the Company until December 9, 2011, the due date of the loan. The note is in default.

As of June 30, 2017, the Company had advances of $3,400 from its officer. The advances form the officers are due on demand, unsecured with no interest.

NOTE 5 – DERIVATIVE LIABILITIES – NOTE CONVERSION FEATURE

Due to the conversion features contained in the convertible notes issued, the actual number of shares of common stock that would be required if a conversion of the note as further described in Note 4 was made through the issuance of the Company’s common stock cannot be predicted, and the Company could be required to issue an amount of shares that may cause it to exceed its authorized share amount. As a result, the conversion feature requires derivative accounting treatment and will be bifurcated from the note and “marked to market” each reporting period through the income statement. The fair value of the conversion future of these notes was recognized as a derivative liability instrument and will be measured at fair value at each reporting period.

The Company remeasured the fair value of the instrument as of June 30, 2017, and recorded an unrealized gain of $732,829 for the six months ended June 30, 2017. The Company determined the fair values of these liabilities using a Black-Scholes valuation model with the following assumptions:

	December 31, 2016	June 30, 2017	Various Dates in 2017
Stock price on measurement date	$0.0001	$0.0001	$0.0001~0.0002
Exercise price	$0.00004~$0.00010	$0.00005	$0.00004~$0.00010
Discount rate	0.20%~0.36%	0.84%	0.20%~0.84%
Expected volatility	265%	257%~282%	257%~282%
Expected dividend yield	0.00%	0.00%	0.00%

The following table provides a summary of the changes in fair value of the derivative financial instruments measured at fair value on a recurring basis using significant unobservable inputs:

Fair value at December 31, 2016	$	1,173,213
Change in fair value of derivative liabilities		(732,829	)
Reclassification to equity		(7,703	)
Fair value at June 30, 2017	$	432,681

 

13

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, we may be party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not involved currently in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.

Commitments and Contingencies

On July 1, 2013, the Company entered into a lease agreement for office space in Australia. The agreement, as amended, expires on October 31, 2019. Rent is approximately $42,000 per year and the Company paid a $7,535 security deposit.

On September 28, 2016, the Company entered into a settlement agreement with the U.S. Security and Exchange Commission. Pursuant the agreement, the Company agreed to pay $50,000 civil penalties for failing to disclose the sale of unregistered equity securities and the existence of the related agreements. As of June 30, 2017, the amount has been paid off.

NOTE 7 – RELATED PARTY TRANSACTIONS

Elmside Pty Ltd

On September 5, 2008, Elmside Pty Ltd, a company related to a former director, agreed to an interest free loan to the Company on an as-needed basis to fund the business operations and expenses of the Company until December 9, 2011, the due date of the loan. As of June 30, 2017 and December 31, 2016, loans from Elmside, a shareholder, were $55,991. The loans are currently in default.

Universal Technology Investments Limited

On May 19, 2016, the Company’s chief executive officer became the sole director and shareholder of Universal Technology Investments Limited (“UTI”). For the six months ended June 30, 2017 and 2016, revenues from UTI were $0 and $3,080,304, respectively.

Golden Matrix Group, Inc.

On July 9, 2016, the Company entered into a loan agreement with Golden Matrix Group, Inc. (“GMGI”), a company controlled by Elray’s chief executive officer and one director. Pursuant to the agreement, the Company agreed to lend GMGI up to $20,000. The borrowings mature in 180 days and accrue interest at 5% per annum. GMGI agreed to assist the Company in developing social gaming technology. As of June 30, 2017, the loan has been paid off.

Articulate Pty Ltd and Brian Goodman

As of June 30, 2017 and December 31, 2016, the Company had accounts payable of $ 2,119,298 and $1,611,815, respectively, to its chief executive officer and Articulate Pty Ltd (“Articulate”), a company controlled by the Company’s chief executive officer, for consulting fees, reimbursement of expenses and compensation.

On August 24, 2016, the Company entered into a strategic partnership agreement with Articulate. Pursuant to the agreement, Articulate will provide non-exclusive back office services to the Company’s clients. In exchange for the service, Elray agreed to pay $10,000 for each month Articulate provides services. Elray will receive 0.5% of the software usage fee paid by Elray’s clients through Articulate. As a result of the agreement with Articulate, the Company terminated its original agreements with UTI and became an agent that receives net commission from Articulate. For the six months ended June 30, 2017 and 2016, revenues from Articulate were $324,128 and $0, respectively. As of June 30, 2017, receivable from Articulate for software usage fee was $74,148.

On January 31, 2017, the Company entered into a Settlement Agreement with Articulate and UTI wherein it was agreed that an amount payable by the Company to Articulate in the amount of $1,372,907 would be offset against the same amount of the Company’s account receivable from UTI. The offset was made effective on December 31, 2016.

 

14

Jay Goodman and Brett Goodman

On May 15, 2013, the Company entered into an agreement with Jay Goodman, son of the Company’s chief executive officer, to provide consulting services assisting the Company with data segmentation, financial and statistical services. In consideration for such services, the Company pays $3,000 per month to Jay Goodman. As of June 30, 2017 and December 31, 2016 the Company had a $148,500 and $130,500 payable to Jay Goodman, respectively.

On February 1, 2016, the Company entered into an agreement with Brett Goodman, another son of the Company’s chief executive officer, where Mr. Brett Goodman will provide consulting services assisting the Company with a project involving social gaming platform. Mr. Brett Goodman has been providing the Company services since 2015. During the six months ended June 30, 2017 and 2016, the Company paid $7,790 and $29,750 consulting fees to Mr. Brett Goodman, respectively. As of June 30, 2017 and 2016, there was no payable to Mr. Brett Goodman.

Globaltech Software Services LLC

The Company’s chief executive officer is a member of Globaltech Software Services LLC (“Globaltech”). As of December 31, 2016, the Company had receivable from Globaltech of $31,352. During the six months ended June 30, 2017, Globaltech paid $66,176. As of June 30, 2017, the Company had other payable to Globaltech of $34,824 for amount overpaid by Globaltech.

NOTE 8 – EQUITY

Preferred Stock – Series A

On May 3, 2012, the Company authorized the creation of 300,000,000 shares of Series A preferred stock. The Class A Preferred Series shares are convertible at a rate of 0.0000003 common shares for each Series A Preferred Share. As of June 30, 2017, there were no Series A Preferred Stock outstanding.

Preferred Stock – Series B

On July 1, 2012, the Company authorized the creation of 100,000,000 shares of Series B preferred stock. On September 24, 2012, the authorized Series B Preferred Stock was increased from 100,000,000 to 280,000,000. After a series of reverse stock splits, the Series B Preferred stock is convertible at a rate of 0.000000003 common stock for each Series B Preferred stock.

On July 14, 2013, the Company entered into a 12-month consultancy agreement with VTG to assist the Company in developing marketing and supporting the technology of virtual online horse racing products and to provide the Company the exclusive use right to certain website domains. In consideration for such services and domains, the Company issued 192,000,000 Series B Preferred shares to VTG. The 192,000,000 Series B Preferred stock have been recorded at their estimated market value of $43,031.

Preferred Stock – Series C

On June 20, 2014, the Company authorized the creation of 10,000,000 shares of Series C preferred stock. The Series C preferred shares are convertible at a rate of 0.0003 common shares for each Series C Preferred Share.

On September 18, 2014, the Company entered into an agreement to acquire a 25% interest in Globaltech Software Services LLC doing business as Golden Galaxy (“Golden Galaxy”) which operates online casinos. Under the terms of the purchase agreement, the Company will be entitled to 1% of the gross wagering generated by Golden Galaxy. In consideration for the purchase, the Company issued 5,000,000 shares of the Company’s Series C preferred stock in June 2015 and recorded $5,000 of other asset. On April 1, 2015, the Company terminated the agreement and stopped receiving 1% of the gross wagering generated by Golden Galaxy.

On September 18, 2014, the Company entered into an agreement with Yangjiu Xie, owner of Asialink Treasure Limited (“ATL”). Pursuant to the agreement, the Company issued 2,083,333 shares of its Series C preferred stock as part of the consideration to acquire 49% of the outstanding shares of ATL in a series of transactions. These shares were recorded at their par value of $2,083 with a subscription receivable at the same amount. The Company has not received the certificate of ownership from ATL.

 

15

Common Stock

On December 29, 2015, the Company issued Tarpon 4,101,000 shares which were sold during the six months ended June 30, 2016. During the six months ended June 30, 2016, the Company issued Tarpon 5,136,000 shares of its common stock according to the settlement agreement discussed in Note 3. These shares were valued at $6,669 based on the market price on the issuance date. $933 net proceeds from the sale were used to pay the original creditors of the claims Tarpon acquired. The remaining $5,736 was recorded as loss on settlement.

On April 27, 2017, the Company filed a certificate of Amendment with the Nevada Secretary of State (the "Nevada SOS") to increase authorized number of common stock from 1.5 billion shares to 2.5 billion.

During the six months ended June 30, 2017, the Company issued 188,506,738 shares of common stock for the conversion of notes payable and accrued interest of $7,576 and $1,786, respectively. See Note 4.

NOTE 9 – CONCERNTRATION

The Company’s revenues for six months ended June 30, 2017 were from one related parties and revenues for six months ended June 30, 2016 were all from UTI. The Company’s software usage cost for the six months ended June 30, 2016 was all related to charges pass through to Elray by an entity controlled by the Company’s chief executive officer. All of the software cost was related to fees pay to one vendor for online casino game contents. As of June 30, 2017, the Company’s only customer is Articulate, a related party.

 

16

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis summarizes the significant factors affecting our consolidated results of operations, financial condition and liquidity position for the six months ended June 30, 2017. This discussion and analysis should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for our year-ended December 31, 2016 and the consolidated unaudited financial statements and related notes included elsewhere in this filing. The following discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

Forward-looking statements

This Quarterly Report on Form 10-Q contains forward looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.

In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date of this Report.

Overview

Elray Resources, Inc. (“Elray” or “Company”) was incorporated in Nevada on December 13, 2006.

On February 23, 2011, Elray entered into a Purchase Agreement (the “Splitrock Agreement”) to acquire 100% of the issued and outstanding shares of Splitrock Ventures (BVI) Limited (“Splitrock”), a British Virgin Islands company, as consideration for the issuance of 197 shares of common stock of the Company. Splitrock is in the online gaming business. On the closing date, pursuant to the terms of the Splitrock Agreement, Anthony Goodman, representing the shareholders of Splitrock, acquired the 197 shares of Elray’s common stock, which resulted in a change of control under which 70% of the shares of Elray are now held by the previous shareholders of Splitrock (Share number adjusted for Reverse Stock Split). In accordance with the Splitrock Agreement, Barry J. Lucas resigned as Chairman and Director and Anthony Goodman was elected as a replacement; Neil Crang resigned as Director and Donald Radcliffe and Roy Sugarman were elected as replacements; and Michael J. Malbourne resigned as Secretary and David E Price, Esq. was appointed as a replacement.

On December 9, 2011, Elray entered into an Amended Purchase Agreement (“Amended Splitrock Agreement”) which amended certain elements of the Splitrock Agreement originally entered into by the parties of February 23, 2011. Whereas under the Splitrock Agreement, the Company was to acquire 100% of the shares of Splitrock, pursuant to the Amended Splitrock Agreement, the Company shall instead acquire only certain assets and liabilities of Splitrock.

The existing officers and directors of Elray resigned and the directors nominated by Splitrock; Messrs. Radcliffe, Sugarman, and Goodman, were elected to the board of Elray. Mr. Goodman was appointed Chief Executive and Chief Financial Officer of Elray. On October 27, 2011, Donald Radcliffe resigned as director and Michael Silverman was appointed as his replacement.

As part of the Amended Splitrock Agreement, Elray acquired gaming intellectual property, gaming domains, trademarks and player databases (“Splitrock IP”), and is currently in the process of developing a new online casino utilizing third party software. Elray’s strategy is to provide online gaming to players in markets where such activities are legal.

The Company has opened a virtual managed corporate office located in Las Vegas in order to meet potential requirements put forth by lawmakers in pending state and federal legislation. Under the proposed bills, Internet-enabled gaming operations must adhere to strict rules including locally-based operations and technology that allows for IP address restrictions and user age verification.

 

17

On April 10, 2013, the Company entered into a 12-month consultancy agreement with online casino operator, Universal Technology Investments Limited ("UTI"). The company would assist in the marketing and support of UTI's online casino for a twelve-month term with a provision to provide additional services as UTI expands their gaming portfolio. The consultancy service was not started until January 2014. This agreement not only brings operating revenue to the company, but also solidifies the expertise in the online gaming market, and assists in positioning the company with respect to being a premier turnkey service provider for both the online and mobile gaming sector.

On January 23, 2014, the Company entered into a Know-How and Asset Purchase Agreement, with VTG and Gold Globe Investments Limited, a BVI company (“GGIL”). VTG and GGIL are engaged in the development of web technology and have jointly developed both an E-store and a virtual exchange platform that facilitate trading of virtual items and casino credits as well as bitcoins. The Company acquired these assets to assist the Company to continue to build and support its marketing and support business for online casinos and social games.

On August 24, 2016, the Company entered into a Strategic Partnership Agreement with Articulate Pty Ltd (“Articulate”), a company provides online intellectual property includes CRM systems, payment gateway system and back office marketing systems. Articulate agreed to provide online gaming support and marketing services to Elray. Both parties worked together to provide service to e-commerce and gaming companies. The agreement was made effective on August 1, 2016.

Plan of Operation

Elray has developed and acquired unique valuable technology that provides state of the art turnkey, marketing tools and CRM systems for online gaming operators.

Our primary competition is expected from overseas based online gaming technology companies. With few exceptions, significant listed gaming companies (many of which are listed on the London Stock Exchange) operate using their own software. As an independent online gaming technology provider, we believe that we retain the ability to provide the best turnkey solutions allowing operators to choose the best of breed and most profitable content available. Additionally, by ensuring that we operate in compliance with U.S. laws, we believe that in the event of legalized gaming in the U.S., we would not be precluded from taking advantage of U.S.-based gaming.

Results of Operations

Three months ended June 30, 2017 compared to the three months ended June 30, 2016.

Revenues

We generated $167,794 revenues during the three months ended June 30, 2017 compared to $1,703,372 for the three months ended June 30, 2017. Revenues for the three months ended June 30, 2017 was related to the marketing tools and CRM systems provided to customers. Started from August 1, 2016, due to compliance and legal environment concern, the Company modified its business model and changes its role to be an agent. Therefore, revenues recorded after August 1, 2016 was presented net with software usage costs. As a result, revenues for the three months ended June 30, 2017 decreased significantly as compared to revenues for the three months ended June 30, 2016.

Operating Expenses

Software usage costs were $0 and $1,242,131, respectively, for the three months ended June 30, 2017 and 2016, respectively. Software usage costs represent cost paid through our related company to an online game provider. Effective August 1, 2016, the Company terminated its original agreement with UTI and became an agent that receives net commission. As such, there was no software usage costs for 2017.

During the three months ended June 30, 2017 and 2016, general and administrative expenses were $353,546 and $453,163, respectively. Decrease of general and administrative expense was mainly attributable to the decrease of consulting expense and legal fees.

 

18

Interest Expenses

During the three months ended June 30, 2017 and 2016, interest expense was $180,484 and $236,547, respectively. The decrease of interest expense was mainly due to less amortization of debt discount on convertible debt during the three months ended June 30, 2017.

Unrealized Gain (Loss) on Derivative Liabilities - Note Conversion Feature

Unrealized loss on derivative liabilities - note conversion feature was $123 for the three months ended June 30, 2017 compared to a gain of $186,659 for the three months ended June 30, 2016. The change was primarily resulted from the fluctuation of the Company’s stock price.

Loss on Settlement of Accounts and Notes Payable

Gain on settlement of extinguishment of debt was $25,611 for the three months ended June 30, 2016. There was no payable settlement during the three months ended June 30, 2017.

Net Loss

We had a net loss of $366,359 and $16,199 for the three months ended June 30, 2017 and 2016, respectively. The increase of net loss in 2017 was as a result of the items discussed above.

Six months ended June 30, 2017 compared to the six months ended June 30, 2016.

Revenues

We generated $324,128 revenues during the six months ended June 30, 2017 compared to $3,080,304 for six months ended June 30, 2017. Revenues for the six months ended June 30, 2017 was related to the marketing tools and CRM systems provided to customers. Started from August 1, 2016, due to compliance and legal environment concern, the Company modified its business model and changes its role to be an agent. Therefore, revenues recorded after August 1, 2016 was presented net with software usage costs. As a result, revenues for the six months ended June 30, 2017 decreased significantly as compared to revenues for the six months ended June 30, 2016.

Operating Expenses

Software usage costs were $0 and $2,398,386, respectively, for the six months ended June 30, 2017 and 2016, respectively. Software usage costs represent cost paid through our related company to an online game provider. Effective August 1, 2016, the Company terminated its original agreement with UTI and became an agent that receives net commission. As such, there was no software usage costs for 2017.

During the six months ended June 30, 2017 and 2016, general and administrative expenses were $616,480 and $838,365, respectively. Decrease of general and administrative expense was mainly attributable to the decrease of consulting expense and legal fees.

Interest Expenses

During the six months ended June 30, 2017 and 2016, interest expense was $388,293 and $462,802, respectively. The decrease of interest expense was mainly due to less amortization of debt discount on convertible debt during the six months ended June 30, 2017.

Unrealized Gain on Derivative Liabilities - Note Conversion Feature

Unrealized gain on derivative liabilities - note conversion feature was $732,829 for the six months ended June 30, 2017 compared to a gain of $373,622 for the six months ended June 30, 2016. The change was primarily resulted from the fluctuation of the Company’s stock price.

Gain (Loss) on Settlement of Accounts and Notes Payable

Gain on settlement of extinguishment of debt was $19,875 for the six months ended June 30, 2016. There was no payable settlement during the six months ended June 30, 2017.

 

19

Net Loss

We had a net income of $52,184 and a net loss of $225,752 for the six months ended June 30, 2017 and 2016, respectively. The decrease of net loss in 2017 was as a result of the items discussed above.

Liquidity and Capital Resources

The Company had $19,781 cash on hand at June 30, 2017.

Our cash provided by operating activities for the six months ended June 30, 2017 was $66,306 compared to $251,450 for the six months ended June 30, 2016. The change was primarily attributable to less payment made for professional and consulting fees during the six months ended June 30, 2017.

Our cash provided by investing activities for the six months ended June 30, 2017 was $15,195 compared to $0 for the six months ended June 30, 2016. Cash provided in investing activities for six months ended June 30, 2017 was related to the collection on proceeds of a note receivable from a related party.

Our cash used in financing activities for the six months ended June 30, 2017 was $80,017 compared to $67,124 for the six months ended June 30, 2016. Cash used in financing activities for the six months ended June 30, 2017 and 2016 was related to payments on short-term notes.

Since its inception, the Company has financed its cash requirements from the sale of common stock, issuance of notes and shareholder loans. Uses of funds have included activities to establish our business, professional fees, and other general and administrative expenses.

Due to our lack of operating history and present inability to generate sufficient revenues, there is substantial doubt about our ability to continue as a going concern.

Material Events and Uncertainties

Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable development stage companies.

There can be no assurance that we will successfully address such risks, expenses and difficulties.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures

As of the end of the period covered by this report (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of the Company's Principal Executive Officer and Principal Financial Officer (the “Certifying Officers”) of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e)) under the Exchange Act. Based on that evaluation, the Certifying Officer has concluded that, as of the Evaluation Date, the disclosure controls and procedures in place were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported on a timely basis in accordance with applicable rules and regulations.

Internal control over financial reporting

The Certifying Officer reviewed our internal control over financial reporting (as defined in rules 13a-15(f) and 15d-15(f)) under the Exchange Act as of the Evaluation Date and concluded that no changes occurred in such control or in other factors during the quarter ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

 

20

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no litigation pending or threatened by or against us.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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

During the six months ended June 30, 2017, the Company issued 188,506,738 shares of common stock for conversions of notes payable.

The offer and sale of such shares of our common stock were effective in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act of 1933 and in Section 4(2) of the Securities Act of 1933. A legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act of 1933 or transferred in a transaction exempt from registration under the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company has no senior securities outstanding.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

 

21

ITEM 6. EXHIBITS

Number	Exhibit Description
3.1	Articles of Incorporation of Elray Resources, Inc.*
3.2	Bylaws of Elray Resources, Inc.*
31.1	Certificate of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certificate of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.DEF	XBRL Definition Linkbase Document
101.LAB	XBRL Label Linkbase Document
101.PRE	XBRL Presentation Linkbase Document

_________

* Filed as an exhibit to our registration statement on Form SB-2 filed June 11, 2007 and incorporated herein by this reference

 

22

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ELRAY RESOURCES, INC.
Date: August 11, 2017	By:	/s/ Anthony Goodman
		Anthony Goodman,
		President and Chief Financial Officer

23

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Anthony Goodman, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Elray Resources, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 11, 2017	By:	/s/ Anthony Goodman
		Chief Executive Officer and Chief Financial Officer
		(Principal Executive Officer and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Anthony Goodman, Chief Executive Officer and Chief Financial Officer of Elray Resources, Inc. (the "Company"), certify, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2017 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2)	the information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company.

Date: August 11, 2017	By:	/s/ Anthony Goodman
		Chief Executive Officer and Chief Financial Officer
		(Principal Executive Officer and Accounting Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 08, 2017
Document And Entity Information
Entity Registrant Name	ELRAY RESOURCES, INC.
Entity Central Index Key	0001402371
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer	No
Is Entity a Voluntary Filer	No
Is Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		1,411,474,231
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2017

XML

Consolidated Balance Sheets - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 19,781	$ 18,297
Accounts receivable – Trade – related parties	74,148	31,352
Note receivable - related party		15,195
Prepaid expenses	14,357	13,592
Total current assets	108,286	78,436
Rent deposit	7,535	7,535
Other asset	5,000	5,000
Total assets	120,821	90,971
Current liabilities:
Accounts payable and accrued liabilities	1,745,511	1,529,746
Accounts payable - related parties	2,267,798	1,742,315
Advances from shareholders	59,391	59,391
Other payable – related party	34,824
Settlement payable	2,162,159	2,162,159
Notes payable	48,509	163,350
Convertible notes payable, net of discounts	3,174,913	3,135,011
Derivative liabilities - note conversion feature	432,681	1,173,213
Total liabilities	9,925,786	9,965,185
Commitments and contingencies
Shareholders' deficit:
Common stock, par value $0.001, 2,500,000,000 shares authorized, 1,411,474,231 and 1,222,967,493 shares issued and outstanding, respectively	1,411,474	1,222,967
Additional paid-in capital	16,563,608	16,735,050
Subscription receivable	(75,672)	(75,672)
Accumulated deficit	(27,903,458)	(27,955,642)
Total shareholders' deficit	(9,804,965)	(9,874,214)
Total liabilities and shareholders' deficit	120,821	90,971
Series A Convertible Preferred Stock [Member]
Shareholders' deficit:
Preferred stock
Series B Convertible Preferred Stock [Member]
Shareholders' deficit:
Preferred stock	192,000	192,000
Series C Convertible Preferred Stock [Member]
Shareholders' deficit:
Preferred stock	$ 7,083	$ 7,083

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2017	Dec. 31, 2016
Common Stock; Par Value	$ 0.001	$ 0.001
Common Stock; Shares Authorized	2,500,000,000	2,500,000,000
Common Stock; Shares Issued	1,411,474,231	1,222,967,493
Common Stock; Shares Outstanding	1,411,474,231	1,222,967,493
Series A Convertible Preferred Stock [Member]
Preferred Stock; Par Value	$ 0.001	$ 0.001
Preferred Stock; Shares Authorized	300,000,000	300,000,000
Preferred Stock; Shares Issued	0	0
Preferred Stock; Shares Outstanding	0	0
Series B Convertible Preferred Stock [Member]
Preferred Stock; Par Value	$ 0.001	$ 0.001
Preferred Stock; Shares Authorized	280,000,000	280,000,000
Preferred Stock; Shares Issued	192,000,000	192,000,000
Preferred Stock; Shares Outstanding	192,000,000	192,000,000
Series C Convertible Preferred Stock [Member]
Preferred Stock; Par Value	$ 0.001	$ 0.001
Preferred Stock; Shares Authorized	10,000,000	10,000,000
Preferred Stock; Shares Issued	7,083,333	7,083,333
Preferred Stock; Shares Outstanding	7,083,333	7,083,333

XML

Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Consolidated Statements Of Operations
Revenues	$ 167,794	$ 1,703,372	$ 324,128	$ 3,080,304
Operating expenses:
Software usage costs		1,242,131		2,398,386
General and administrative	353,546	453,163	616,480	838,365
Total operating expenses	353,546	1,695,294	616,480	3,236,751
Income (loss) from operations	(185,752)	8,078	(292,352)	(156,447)
Other income (expense):
Interest expense	(180,484)	(236,547)	(388,293)	(462,802)
Unrealized gain (loss) on change in fair value of derivative liabilities – note conversion feature	(123)	186,659	732,829	373,622
Gain on settlement of accounts payable and notes payable		25,611		19,875
Total other income (expense)	(180,607)	(24,277)	344,536	(69,305)
Net income (loss)	$ (366,359)	$ (16,199)	$ 52,184	$ (225,752)
Net earnings (loss) per common share - basic	$ (0.00)	$ (0.00)	$ 0.00	$ (0.00)
Net earnings (loss) per common share - diluted	$ (0.00)	$ (0.00)	$ 0.00	$ (0.00)
Weighted average number of common shares outstanding - basic	1,370,904,722	642,368,207	1,303,422,568	369,131,318
Weighted average number of common shares outstanding - diluted	1,370,904,722	642,368,207	37,376,484,930	369,131,318

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows from operating activities:
Net income (loss)	$ 52,184	$ (225,752)
Adjustments to reconcile net loss to cash provided by operations activities:
Amortization of debt discount	47,478	375,708
Unrealized gain on change in fair value of derivative liabilities	(732,829)	(373,622)
Loss on settlement of accounts payable and notes payable		(19,875)
Changes in operating assets and liabilities:
Accounts receivable		(1,420,269)
Accounts receivable - related parties	(42,796)
Prepaid expense	(765)	(2,230)
Accounts payable and accrued liabilities	217,551	114,081
Accounts payable - related parties	525,483	1,803,409
Net cash provided by operating activities	66,306	251,450
Cash flows from investing activities:
Investment in note receivable - related party	15,195
Net cash provided by investing activities	15,195
Cash flows from financing activities:
Proceeds from short-term note payable – related party	34,824	60,000
Repayment of short-term notes payable	(114,841)	(128,024)
Advances from related party		900
Net cash used in financing activities	(80,017)	(67,124)
Net change in cash and cash equivalents	1,484	184,326
Cash and cash equivalents at beginning of period	18,297	111,133
Cash and cash equivalents at end of period	19,781	295,459
Supplemental disclosure of cash flow information:
Cash paid for interest	14,790	42,422
Cash paid for income taxes
Non-cash investing and financing activities:
Common stock issued for conversion of debt	$ 9,362	$ 137,703

XML

BASIS OF PRESENTATION AND ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

NOTE 1 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Elray Resources, Inc. ("Elray" or the "Company"), a Nevada Company formed on December 13, 2006, has been providing marketing and support for online gaming operations. The Company maintains its administrative office in Australia and its gaming operations is currently targeting Asian market.

The accompanying unaudited interim consolidated financial statements of Elray Resources, Inc. (“Elray” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report for the year ended December 31, 2016 on Form 10-K filed on April 12, 2017.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year ended December 31, 2016 have been omitted.

Use of Estimates

The preparation of financial statements in conformity with 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 at the date of the balance sheet. Actual results could differ from those estimates.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current period presentation.

Cash and Cash Equivalents

The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents.

Allowance for doubtful accounts

The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. The

Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. As of June 30, 2017 and December 31, 2016, allowances for doubtful accounts was $5,521.

Long Lived Assets

Long-lived assets to be held and used or disposed of other than by sale are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used or disposed of other than by sale are recognized based on the fair value of the asset. Long-lived assets to be disposed of by sale are reported at the lower of its carrying amount or fair value less cost to sell.

Intangible Assets

Intangible assets consist of expenditures for domain names and certain intellectual properties. The intangible assets are recorded at cost and amortized over its estimated useful life of 3 years.

Derivative Instruments

Derivatives are measured at their fair value on the balance sheet. In determining the appropriate fair value, the Company uses the Black-Scholes-Merton option pricing model. Changes in fair value are recorded in the statement of operations.

Debt Discount

Debt discount is amortized over the term of the related debt using the effective interest rate method.

Revenues

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Prior to July 31, 2016, the Company recorded revenue at gross charge to its customers as the Company was the principal of the transactions. Starting August 1, 2016, due to compliance and legal environmental concerns, the Company modified its business model and changed its role to an agent. Therefore, revenues recorded after August 1, 2016 are presented net with software usage costs.

Income Taxes

Deferred income taxes reflect the net effect of (a) temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of operations because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry forward has been recognized, as it is not deemed likely to be realized.

Earnings (Loss) Per Common Share

Basic net earnings (loss) per common share are computed by dividing net earnings (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

The dilutive effect of outstanding stock options and warrants is reflected in diluted earnings per share by application of the treasury stock method. The dilutive effect of outstanding convertible securities is reflected in diluted earnings per share by application of the if-converted method.

The following is a reconciliation of basic and diluted earnings (loss) per common share for the three and six months ended 2017 and 2016:

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2017			2016			2017		2016
Basic earnings (loss) per common share
Numerator:
Net income (loss) available to common shareholders	$	(366,359	)	$	(16,199	)	$	52,184	$	(225,752	)
Denominator:
Weighted average common shares outstanding		1,370,904,722			642,368,207			1,303,422,568		369,131,318
Basic earnings (loss) per common share	$	(0.00	)	$	(0.00	)	$	0.00	$	(0.00	)
Diluted earnings (loss) per common share
Numerator:
Net income (loss) available to common shareholders	$	(366,359	)	$	(16,199	)	$	52,184	$	(225,752	)
Add convertible debt interest		184,282			-			324,515		-
Net income (loss) available to common shareholders	$	(182,077	)	$	(16,199	)	$	376,699	$	(225,752	)
Denominator:
Weighted average common shares outstanding		1,370,904,722			642,368,207			1,303,422,568		369,131,318
Preferred shares		2,362			-			2,362		-
Convertible debt		36,073,060,000			-			36,073,060,000		-
Adjusted weighted average common shares outstanding		37,443,967,084			642,368,207			37,376,484,930		369,131,318
Diluted earnings (loss) per common share	$	(0.00	)	$	(0.00	)		0.00		(0.00	)

For the three and six months ended June 30, 2016 fully diluted earnings per share excludes notes convertible to 36,555,562,222 common shares and preferred stock convertible to 2,362 common shares, because their inclusion would be anti-dilutive.

Subsequent Events

Elray evaluated subsequent events through the date these financial statements were issued for disclosure purposes.

Recent Accounting Pronouncements

In May 2014, a pronouncement was issued that creates common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards. The new guidance supersedes most preexisting revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with an option to adopt the standard one year earlier. The new standard is to be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of the new pronouncement on its financial statements.

In February 2016, a pronouncement was issued that creates new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early application permitted. The new standard is to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the new pronouncement on its financial statements.

Elray’s management does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.

XML

GOING CONCERN

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

NOTE 2 - GOING CONCERN

The accompanying unaudited consolidated financial statements of Elray have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had a negative working capital of $9,817,500 at June 30, 2017. The factor raises substantial doubt regarding the Company’s ability to continue as a going concern. Without realization of additional capital, it would be unlikely for Elray to continue as a going concern. Elray's management plans on raising cash from public or private debt, on an as needed basis, and in the longer term, revenues from the gambling business. Elray's ability to continue as a going concern is dependent on these additional cash financings, and, ultimately, upon achieving profitable operations through the development of its gambling business.

XML

SETTLEMENT PAYABLE

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Note 3 - SETTLEMENT PAYABLE

On December 20, 2013, the Company entered into a settlement agreement with Tarpon Bay Partners LLC (“Tarpon”) whereby Tarpon acquired certain notes and accounts payable against the Company in the amount of $2,656,214. Pursuant to the agreement, the Company and Tarpon submitted the settlement agreement to the Circuit Court of the Second Judicial Circuit, Leon County, Florida for a hearing on the fairness of the agreement and the exemption from registration under the Securities Act of 1933 for the shares that will be issued to Tarpon for resale (“Settlement Shares”). 75% of the proceeds less all applicable fees and charges from the resale of the Settlement Shares will be remitted to the original claim holders of the Company (“Remittance Amount”). The Company agreed to issue sufficient shares to generate proceeds such that the aggregate Remittance Amount equals $2,656,214. The settlement agreement was effective on January 27, 2014 when the court granted approval.

During the six months ended June 30, 2016, the Company issued Tarpon 5,136,000 common shares. Net proceeds from the sales amounted to $933 was remitted to the original claim holders. As of June 30, 2017, the Company has settlement payable of $2,162,159.

XML

NOTES PAYABLE

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

NOTE 4 - NOTES PAYABLE

Notes payable

Notes payable at June 30, 2017 and December 31, 2016 consisted of the following:

	Final Maturity	Interest Rate	June 30, 2017		December 31, 2016
Morchester International Limited	July 14, 2012	15%	$	35,429	$	35,429
Morchester International Limited	July 14, 2012	8%		10,000		10,000
PowerUp Lending Group, Ltd	February 22, 2017	33%		-		13,934
Auctus Private Equity Fund, LLC	June 27, 2017	N/A		-		25,758
PowerUp Lending Group, Ltd	May 6, 2017	46%		-		42,999
PowerUp Lending Group, Ltd	July 20, 2017	46%		3,080		35,230
Total			$	48,509	$	163,350

On December 9, 2011, Elray entered into an Amended Splitrock Agreement whereby the Company acquired certain assets and liabilities of Splitrock. As part of the liabilities assumed in terms of the Amended Splitrock Agreement, the Company assumed notes payable of $292,929 bearing interest of 8% or 15% per annum. On January 27, 2014, the court granted an approval of the settlement agreement with Tarpon whereby the Company would issue shares to Tarpon for resale to pay off certain liabilities. As a result, principal of $247,500 and associated accrued interest acquired by Tarpon were reclassified to settlement payable. The remaining notes issued to Morchester International Limited not purchased by Tarpon are currently in default. The default had no effect on the notes’ interest rate.

On May 6, 2016, the Company entered into a third loan agreement with PowerUp for $60,000. Total repayment amount for the loan is $76,000. The loan is payable daily at $360 and secured by all of the Company’s assets. As of June 30, 2017, the loan has been paid off.

On June 27, 2016, the Company reached a settlement agreement with Auctus. Pursuant to the settlement agreement, the Company agreed to pay $61,819 in full and final settlement of all outstanding convertible notes and accrued interest. During the six months ended June 30, 2017, the Company made payments totaling $25,758. As of June 30, 2017, the loan has been paid off.

On July 28, 2016, the Company entered into a fourth loan agreement with PowerUp for $75,000. Total repayment amount for the loan is $95,250. The loan is payable daily at $451 and secured by all of the Company’s assets. As of June 30, 2017, the loan has been paid off.

On September 14, 2016, the Company entered into a fifth loan agreement with PowerUp for $50,000. Total repayment amount for the loan is $63,500. The loan is payable daily at $301 and secured by all of the Company’s assets. As of June 30, 2017, balance of this note was $3,080.

Convertible notes payable

Convertible notes payable, at June 30, 2017 and December 31, 2016, consisted of the following:

	Interest Rate	June 30, 2017		December 31, 2016
JSJ Investments, Inc.	10%~12%	$	128,853	$	128,853
LG Capital Funding, LLC	8%		4,264		8,707
WHC Capital, LLC	12%		116,936		116,936
Beaufort Capital Partners, LLC	12%		10,966		10,966
Tangiers Investment Group, LLC	0%~10%		48,393		48,394
GSM Fund Management, LLC	12%		35,309		38,442
Microcap Equity Group, LLC	10%		18,892		18,892
Virtual Technology Group, Ltd	24%		481,500		481,500
Gold Globe Investments Ltd	24%		2,324,000		2,324,000
Vista Capital Investments, LLC.	12%		5,800		5,800
Subtotal			3,174,913		3,182,489
Debt discount			-		(47,478	)
Total		$	3,174,913	$	3,135,011

JSJ Investments, Inc.

On May 31, 2013, the Company entered into a convertible promissory note with JSJ Investments, Inc. (“JSJ”) for $50,000. The note matured on December 2, 2013. The note holder has the option to convert the note to common shares in the Company at a discount of 50% of the average closing price over the last 120 days prior to conversion, or the average closing price over the last seven days prior to conversion. As of June 30, 2017, the remaining principal of $10,670 has not been converted. The note is currently in default. The default had no effect on the note’s interest rate.

On August 21, 2014, the Company entered into a convertible promissory note with JSJ for $50,000 cash. The note matured on February 21, 2015. Upon the maturity, the note has a cash redemption premium of 150% of the principal amount. The note is convertible to the Company’s common shares at a discount of 60% of the average of the three lowest bids on the twenty days before the date this note is executed, or 60% of the average of the three lowest bids during the twenty trading days preceding the delivery of any conversion notice, whichever is lower. The note is currently in default and has a default interest rate of 20% per annum. As of June 30, 2017, balance of this note was $45,560.

On January 20, 2015, the Company entered into a convertible promissory note with JSJ for $40,000. The note bears interest at 12% and matured on July 20, 2015. Upon the maturity, the note has a cash redemption premium of 150% of the principal amount. The note is convertible to the Company’s common shares at 40% of the lowest trading price on the twenty days before the date this note is executed, or 40% of the lowest trading price during the twenty trading days preceding the delivery of any conversion notice, whichever is lower. The note is currently in default. The default had no effect on the note’s interest rate. As of June 30, 2017, balance of this note was $40,000.

On January 20, 2015, the Company entered into a convertible promissory note with JSJ for $60,000, which was issued in exchange for a portion of the promissory note issued to VTG on January 23, 2014. The note bears interest at 12% and matured on January 20, 2015. JSJ has the right to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest trading price on the twenty days before the date this note is executed, or 50% of the lowest trading price during the twenty trading days preceding the delivery of any conversion notice, whichever is lower. The Company recorded a loss on extinguishment of debt of $441 related to the exchange. The note is currently in default. The default had no effect on the note’s interest rate. As of June 30, 2017, balance of this note was $32,623.

LG Capital Funding, LLC

On November 10, 2014, the Company entered into a convertible promissory note with LG for $37,000. The note matured on November 10, 2015. LG has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the average lowest three trading prices during the fifteen trading days prior to the conversion date. During the six months ended June 30, 2017, the Company issued 124,559,400 shares of common stock for the conversion of this note in the amount of $4,443 and accrued interest of $1,785. As of June 30, 2017, balance of this note was $4,264. The note is currently in default and has a default interest rate of 24% per annum.

WHC Capital, LLC

On September 23, 2014, the Company entered into a convertible promissory note with WHC Capital, LLC (“WHC”) for $75,000. The note bears interest at 12% and matured on September 23, 2015. WHC has the right at any time during the period beginning on the date of this note to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest intra-day trading price during the fifteen trading days prior to the conversion date. On September 23, 2015, the Company failed to repay the outstanding balance of this note and a penalty of $41,978 was added to the outstanding balance pursuant to the note terms. As of June 30, 2017, balance of this note was $116,936. This note is currently in default and has a default interest rate of 22% per annum.

Beaufort Capital Partners, LLC

On September 2, 2014, the Company entered into a convertible promissory note with Beaufort Capital Partners, LLC (“Beaufort”) for $21,000. The note matured on March 2, 2015. Beaufort has the right after the maturity date to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest trading prices during the fifteen trading days prior to the conversion date. Under certain conditions, the conversion price would be reset to $0.0001 or 65% off the lowest price of the previous five trading days. As of June 30, 2017, balance of this note was $10,966. This note is currently in default. The default had no effect on the note’s interest rate.

Tangiers Investment Group, LLC

On October 13, 2014, the Company entered into a convertible promissory note with Tangiers Investment Group LLC (“Tangiers”) for $55,000. The note matured on October 13, 2015. Tangiers has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 45% of the lowest trading prices during the twenty trading days prior to the conversion date. As of June 30, 2017, balance of this note was $15,393. This note is currently and has a default interest rate of 20% per annum.

On October 13, 2014, the Company entered into a convertible promissory note with Tangiers for $33,000. The note bears interest at 10% and matured on October 13, 2015. Tangiers has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 45% of the lowest trading prices during the twenty trading days prior to the conversion date. This note is currently in default and has a default interest rate of 20% per annum.

GSM Fund Management LLC

On January 30, 2015, the Company entered into an assignment and modification agreement to assign $62,500 of the convertible promissory note of VTG dated January 23, 2014 to GSM Fund Management LLC (“GSM”). The note bears interest at 12% and matured on January 30, 2016. GSM has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest closing bid price in the 15 trading days prior to the conversion date. The Company recorded a loss on extinguishment of debt of $52,364 related to the exchange. During the six months ended June 30, 2017, the Company issued 63,947,338 shares of common stock for the conversion of this note in the amount of $3,133. As of June 30, 2017, balance of this note was $35,309. The note is currently in default and has a default interest rate of 18%.

Microcap Equity Group, LLC

On February 23, 2015, the Company entered into a convertible promissory note with Microcap Equity Group LLC ("Microcap") for $20,000, which was issued in exchange for a portion of the promissory note issued to VTG on January 23, 2014. The note matured on January 23, 2017. Microcap has the right to convert the balance outstanding into the Company’s common stock at a rate equal to 40% of the lower of the lowest bid price during the thirty trading days prior to the conversion date, or the lowest bid price on the day that the converted shares are cleared for physical delivery. The Company recorded a loss on extinguishment of debt of $28,213 related to the exchange. As of June 30, 2017, balance of this note was $18,892. The note became in default on January 23, 2017. The default had no effect on the note’s interest rate.

Virtual Technology Group, Ltd

On January 23, 2014, the Company entered into a convertible promissory note with VTG for $1,500,000. VTG has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 100% of the average of the closing bid prices for the seven trading days prior to the conversion date when the Company’s shares are traded in the OTCQB or during the ten trading days prior to the conversion date when the Company’s shares are traded on another other exchange. On November 10, 2014, $50,000 of this note was replaced with a note issued to LG. On January 20, January 23 and January 30, 2015, $60,000, $20,000 and $62,500 of this note were replaced with notes issued to JSJ, Microcap and GSM. As of June 30, 2017, balance of this note was $481,500. The note became in default on January 23, 2017 and has a default interest rate of 24% per annum.

Gold Globe Investments Ltd

On January 23, 2014, the Company entered into a convertible promissory note with GGIL for $2,800,000. GGIL has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 100% of the average of the lowest three trading prices during the seven trading days prior to the conversion date when the Company’s shares are traded in the OTCQB or during the ten trading days prior to the conversion date when the Company’s shares are traded on another exchange. On December 3, 2014, $45,000 of this note was replaced with a note issued to Tangiers. As of June 30, 2017, balance of this note was $2,324,000. The note became in default on January 23, 2017 and has a default interest rate of 24% per annum.

Vista Capital Investments, LLC.

On April 15, 2014, the Company entered into a convertible promissory note with Vista Capital Investments, LLC (“Vista”) for $250,000. The note has an original issuance discount of $25,000. The note matures 2 years from the date of each payment of the principal from Vista. In the event that the note remains unpaid at maturity date, the outstanding balance shall immediately increase to 120% of the outstanding balance. Vista has the right to convert the outstanding balance into the Company’s common stock at a rate equal to the lesser of $0.008 per share or 60% of the lowest trade occurring during the twenty-five consecutive trading days preceding the conversion date. Due to certain events that occurred during 2014, the conversion price has been reset to $0.005 per share or 50% of the lowest trade occurring during the twenty-five consecutive trading days preceding the conversion date. Pursuant to the agreement, if the conversion price calculated under this agreement is less than $0.01 per share, the principal amount outstanding shall increase by $10,000 (“Sub-Penny”). $25,000 net proceeds were received on April 23, 2014. The remaining fund of this note has not been received. As of June 30, 2017, balance of this note was $5,800 which matured on April 15, 2016. The note is currently in default. The default had no effect on the note’s interest rate.

Debt Discount

The table below presents the changes of the debt discount during the six months ended June 30, 2017:

	Amount
December 31, 2016	$	47,478
Amortization		(47,478	)
June 30, 2017	$	-

Loans from shareholders

On September 5, 2008, Elmside Pty Ltd, a company related to a former director, agreed to an interest free loan of $55,991 to the Company on an as-needed basis to fund the business operations and expenses of the Company until December 9, 2011, the due date of the loan. The note is in default.

As of June 30, 2017, the Company had advances of $3,400 from its officer. The advances form the officers are due on demand, unsecured with no interest.

XML

DERIVATIVE LIABILITIES - NOTE CONVERSION FEATURE

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

NOTE 5 - DERIVATIVE LIABILITIES - NOTE CONVERSION FEATURE

Due to the conversion features contained in the convertible notes issued, the actual number of shares of common stock that would be required if a conversion of the note as further described in Note 4 was made through the issuance of the Company’s common stock cannot be predicted, and the Company could be required to issue an amount of shares that may cause it to exceed its authorized share amount. As a result, the conversion feature requires derivative accounting treatment and will be bifurcated from the note and “marked to market” each reporting period through the income statement. The fair value of the conversion future of these notes was recognized as a derivative liability instrument and will be measured at fair value at each reporting period.

The Company remeasured the fair value of the instrument as of June 30, 2017, and recorded an unrealized gain of $732,829 for the six months ended June 30, 2017. The Company determined the fair values of these liabilities using a Black-Scholes valuation model with the following assumptions:

	December 31, 2016	June 30, 2017	Various Dates in 2017
Stock price on measurement date	$0.0001	$0.0001	$0.0001~0.0002
Exercise price	$0.00004~$0.00010	$0.00005	$0.00004~$0.00010
Discount rate	0.20%~0.36%	0.84%	0.20%~0.84%
Expected volatility	265%	257%~282%	257%~282%
Expected dividend yield	0.00%	0.00%	0.00%

The following table provides a summary of the changes in fair value of the derivative financial instruments measured at fair value on a recurring basis using significant unobservable inputs:

Fair value at December 31, 2016	$	1,173,213
Change in fair value of derivative liabilities		(732,829	)
Reclassification to equity		(7,703	)
Fair value at June 30, 2017	$	432,681

XML

COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, we may be party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not involved currently in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.

Commitments and Contingencies

On July 1, 2013, the Company entered into a lease agreement for office space in Australia. The agreement, as amended, expires on October 31, 2019. Rent is approximately $42,000 per year and the Company paid a $7,535 security deposit.

On September 28, 2016, the Company entered into a settlement agreement with the U.S. Security and Exchange Commission. Pursuant the agreement, the Company agreed to pay $50,000 civil penalties for failing to disclose the sale of unregistered equity securities and the existence of the related agreements. As of June 30, 2017, the amount has been paid off.

XML

RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

NOTE 7- RELATED PARTY TRANSACTIONS

Elmside Pty Ltd

On September 5, 2008, Elmside Pty Ltd, a company related to a former director, agreed to an interest free loan to the Company on an as-needed basis to fund the business operations and expenses of the Company until December 9, 2011, the due date of the loan. As of June 30, 2017 and December 31, 2016, loans from Elmside, a shareholder, were $55,991. The loans are currently in default.

Universal Technology Investments Limited

On May 19, 2016, the Company’s chief executive officer became the sole director and shareholder of Universal Technology Investments Limited (“UTI”). For the six months ended June 30, 2017 and 2016, revenues from UTI were $0 and $3,080,304, respectively.

Golden Matrix Group, Inc.

On July 9, 2016, the Company entered into a loan agreement with Golden Matrix Group, Inc. (“GMGI”), a company controlled by Elray’s chief executive officer and one director. Pursuant to the agreement, the Company agreed to lend GMGI up to $20,000. The borrowings mature in 180 days and accrue interest at 5% per annum. GMGI agreed to assist the Company in developing social gaming technology. As of June 30, 2017, the loan has been paid off.

Articulate Pty Ltd and Brian Goodman

As of June 30, 2017 and December 31, 2016, the Company had accounts payable of $ 2,119,298 and $1,611,815, respectively, to its chief executive officer and Articulate Pty Ltd (“Articulate”), a company controlled by the Company’s chief executive officer, for consulting fees, reimbursement of expenses and compensation.

On August 24, 2016, the Company entered into a strategic partnership agreement with Articulate. Pursuant to the agreement, Articulate will provide non-exclusive back office services to the Company’s clients. In exchange for the service, Elray agreed to pay $10,000 for each month Articulate provides services. Elray will receive 0.5% of the software usage fee paid by Elray’s clients through Articulate. As a result of the agreement with Articulate, the Company terminated its original agreements with UTI and became an agent that receives net commission from Articulate. For the six months ended June 30, 2017 and 2016, revenues from Articulate were $324,128 and $0, respectively. As of June 30, 2017, receivable from Articulate for software usage fee was $74,148.

On January 31, 2017, the Company entered into a Settlement Agreement with Articulate and UTI wherein it was agreed that an amount payable by the Company to Articulate in the amount of $1,372,907 would be offset against the same amount of the Company’s account receivable from UTI. The offset was made effective on December 31, 2016.

Jay Goodman and Brett Goodman

On May 15, 2013, the Company entered into an agreement with Jay Goodman, son of the Company’s chief executive officer, to provide consulting services assisting the Company with data segmentation, financial and statistical services. In consideration for such services, the Company pays $3,000 per month to Jay Goodman. As of June 30, 2017 and December 31, 2016 the Company had a $148,500 and $130,500 payable to Jay Goodman, respectively.

On February 1, 2016, the Company entered into an agreement with Brett Goodman, another son of the Company’s chief executive officer, where Mr. Brett Goodman will provide consulting services assisting the Company with a project involving social gaming platform. Mr. Brett Goodman has been providing the Company services since 2015. During the six months ended June 30, 2017 and 2016, the Company paid $7,790 and $29,750 consulting fees to Mr. Brett Goodman, respectively. As of June 30, 2017 and 2016, there was no payable to Mr. Brett Goodman.

Globaltech Software Services LLC

The Company’s chief executive officer is a member of Globaltech Software Services LLC (“Globaltech”). As of December 31, 2016, the Company had receivable from Globaltech of $31,352. During the six months ended June 30, 2017, Globaltech paid $66,176. As of June 30, 2017, the Company had other payable to Globaltech of $34,824 for amount overpaid by Globaltech.

XML

EQUITY

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

NOTE 8 - EQUITY

Preferred Stock – Series A

On May 3, 2012, the Company authorized the creation of 300,000,000 shares of Series A preferred stock. The Class A Preferred Series shares are convertible at a rate of 0.0000003 common shares for each Series A Preferred Share. As of June 30, 2017, there were no Series A Preferred Stock outstanding.

Preferred Stock – Series B

On July 1, 2012, the Company authorized the creation of 100,000,000 shares of Series B preferred stock. On September 24, 2012, the authorized Series B Preferred Stock was increased from 100,000,000 to 280,000,000. After a series of reverse stock splits, the Series B Preferred stock is convertible at a rate of 0.000000003 common stock for each Series B Preferred stock.

On July 14, 2013, the Company entered into a 12-month consultancy agreement with VTG to assist the Company in developing marketing and supporting the technology of virtual online horse racing products and to provide the Company the exclusive use right to certain website domains. In consideration for such services and domains, the Company issued 192,000,000 Series B Preferred shares to VTG. The 192,000,000 Series B Preferred stock have been recorded at their estimated market value of $43,031.

Preferred Stock – Series C

On June 20, 2014, the Company authorized the creation of 10,000,000 shares of Series C preferred stock. The Series C preferred shares are convertible at a rate of 0.0003 common shares for each Series C Preferred Share.

On September 18, 2014, the Company entered into an agreement to acquire a 25% interest in Globaltech Software Services LLC doing business as Golden Galaxy (“Golden Galaxy”) which operates online casinos. Under the terms of the purchase agreement, the Company will be entitled to 1% of the gross wagering generated by Golden Galaxy. In consideration for the purchase, the Company issued 5,000,000 shares of the Company’s Series C preferred stock in June 2015 and recorded $5,000 of other asset. On April 1, 2015, the Company terminated the agreement and stopped receiving 1% of the gross wagering generated by Golden Galaxy.

On September 18, 2014, the Company entered into an agreement with Yangjiu Xie, owner of Asialink Treasure Limited (“ATL”). Pursuant to the agreement, the Company issued 2,083,333 shares of its Series C preferred stock as part of the consideration to acquire 49% of the outstanding shares of ATL in a series of transactions. These shares were recorded at their par value of $2,083 with a subscription receivable at the same amount. The Company has not received the certificate of ownership from ATL.

Common Stock

On December 29, 2015, the Company issued Tarpon 4,101,000 shares which were sold during the six months ended June 30, 2016. During the six months ended June 30, 2016, the Company issued Tarpon 5,136,000 shares of its common stock according to the settlement agreement discussed in Note 3. These shares were valued at $6,669 based on the market price on the issuance date. $933 net proceeds from the sale were used to pay the original creditors of the claims Tarpon acquired. The remaining $5,736 was recorded as loss on settlement.

On April 27, 2017, the Company filed a certificate of Amendment with the Nevada Secretary of State (the "Nevada SOS") to increase authorized number of common stock from 1.5 billion shares to 2.5 billion.

During the six months ended June 30, 2017, the Company issued 188,506,738 shares of common stock for the conversion of notes payable and accrued interest of $7,576 and $1,786, respectively. See Note 4.

XML

CONCENTRATION

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Note 9 - CONCENTRATION

The Company’s revenues for six months ended June 30, 2017 were from one related parties and revenues for six months ended June 30, 2016 were all from UTI. The Company’s software usage cost for the six months ended June 30, 2016 was all related to charges pass through to Elray by an entity controlled by the Company’s chief executive officer. All of the software cost was related to fees pay to one vendor for online casino game contents. As of June 30, 2017, the Company’s only customer is Articulate, a related party.

XML

BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2017

Basis Of Presentation And Accounting Policies Policies

Use of Estimates

The preparation of financial statements in conformity with 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 at the date of the balance sheet. Actual results could differ from those estimates.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current period presentation.

Cash and Cash Equivalent

The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents.

Allowance for doubtful accounts

The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. As of June 30, 2017 and December 31, 2016, allowances for doubtful accounts was $5,521.

Long Lived Assets

Long-lived assets to be held and used or disposed of other than by sale are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used or disposed of other than by sale are recognized based on the fair value of the asset. Long-lived assets to be disposed of by sale are reported at the lower of its carrying amount or fair value less cost to sell.

Intangible Assets

Intangible assets consist of expenditures for domain names and certain intellectual properties. The intangible assets are recorded at cost and amortized over its estimated useful life of 3 years.

Derivative Instruments

Derivatives are measured at their fair value on the balance sheet. In determining the appropriate fair value, the Company uses the Black-Scholes-Merton option pricing model. Changes in fair value are recorded in the statement of operations.

Debt Discount

Debt discount is amortized over the term of the related debt using the effective interest rate method.

Revenues

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Prior to July 31, 2016, the Company recorded revenue at gross charge to its customers as the Company was the principal of the transactions. Starting August 1, 2016, due to compliance and legal environmental concerns, the Company modified its business model and changed its role to an agent. Therefore, revenues recorded after August 1, 2016 are presented net with software usage costs.

Income Tax

Deferred income taxes reflect the net effect of (a) temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of operations because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry forward has been recognized, as it is not deemed likely to be realized.

Earnings (Loss) Per Common Share

Basic net earnings (loss) per common share are computed by dividing net earnings (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

The dilutive effect of outstanding stock options and warrants is reflected in diluted earnings per share by application of the treasury stock method. The dilutive effect of outstanding convertible securities is reflected in diluted earnings per share by application of the if-converted method.

The following is a reconciliation of basic and diluted earnings (loss) per common share for the three and six months ended 2017 and 2016:

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2017			2016			2017		2016
Basic earnings (loss) per common share
Numerator:
Net income (loss) available to common shareholders	$	(366,359	)	$	(16,199	)	$	52,184	$	(225,752	)
Denominator:
Weighted average common shares outstanding		1,370,904,722			642,368,207			1,303,422,568		369,131,318
Basic earnings (loss) per common share	$	(0.00	)	$	(0.00	)	$	0.00	$	(0.00	)
Diluted earnings (loss) per common share
Numerator:
Net income (loss) available to common shareholders	$	(366,359	)	$	(16,199	)	$	52,184	$	(225,752	)
Add convertible debt interest		184,282			-			324,515		-
Net income (loss) available to common shareholders	$	(182,077	)	$	(16,199	)	$	376,699	$	(225,752	)
Denominator:
Weighted average common shares outstanding		1,370,904,722			642,368,207			1,303,422,568		369,131,318
Preferred shares		2,362			-			2,362		-
Convertible debt		36,073,060,000			-			36,073,060,000		-
Adjusted weighted average common shares outstanding		37,443,967,084			642,368,207			37,376,484,930		369,131,318
Diluted earnings (loss) per common share	$	(0.00	)	$	(0.00	)		0.00		(0.00	)

For the three and six months ended June 30, 2016 fully diluted earnings per share excludes notes convertible to 36,555,562,222 common shares and preferred stock convertible to 2,362 common shares, because their inclusion would be anti-dilutive.

Subsequent Events

Elray evaluated subsequent events through the date these financial statements were issued for disclosure purposes.

Recent Accounting Pronouncements

In May 2014, a pronouncement was issued that creates common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards. The new guidance supersedes most preexisting revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with an option to adopt the standard one year earlier. The new standard is to be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of the new pronouncement on its financial statements.

In February 2016, a pronouncement was issued that creates new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early application permitted. The new standard is to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the new pronouncement on its financial statements.

Elray’s management does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.

XML

SUMMARY OF ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2017

Summary Of Accounting Policies Tables

Reconciliation of basic and diluted earnings (loss) per common share

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2017			2016			2017		2016
Basic earnings (loss) per common share
Numerator:
Net income (loss) available to common shareholders	$	(366,359	)	$	(16,199	)	$	52,184	$	(225,752	)
Denominator:
Weighted average common shares outstanding		1,370,904,722			642,368,207			1,303,422,568		738,262,636
Basic earnings (loss) per common share	$	(0.00	)	$	(0.00	)	$	0.00	$	(0.00	)
Diluted earnings (loss) per common share
Numerator:
Net income (loss) available to common shareholders	$	(366,359	)	$	(16,199	)	$	52,184	$	(225,752	)
Add convertible debt interest		184,282			-			324,515		-
Net income (loss) available to common shareholders	$	(182,077	)	$	(16,199	)	$	376,699	$	(225,752	)
Denominator:
Weighted average common shares outstanding		1,370,904,722			642,368,207			1,303,422,568		738,262,636
Preferred shares		2,362			-			2,362		-
Convertible debt		36,073,060,000			-			36,073,060,000		-
Adjusted weighted average common shares outstanding		37,443,967,084			642,368,207			37,376,484,930		738,262,636
Diluted earnings (loss) per common share	$	(0.00	)	$	(0.00	)		0.00		(0.00	)

XML

NOTES PAYABLE (Tables)

6 Months Ended

Jun. 30, 2017

Notes Payable Tables

Notes Payable

	Final Maturity	Interest Rate	June 30, 2017		December 31, 2016
Morchester International Limited	July 14, 2012	15%	$	35,429	$	35,429
Morchester International Limited	July 14, 2012	8%		10,000		10,000
PowerUp Lending Group, Ltd	February 22, 2017	33%		-		13,934
Auctus Private Equity Fund, LLC	June 27, 2017	N/A		-		25,758
PowerUp Lending Group, Ltd	May 6, 2017	46%		-		42,999
PowerUp Lending Group, Ltd	July 20, 2017	46%		3,080		35,230
Total			$	48,509	$	163,350

Convertible Notes Payable

	Interest Rate	June 30, 2017		December 31, 2016
JSJ Investments, Inc.	10%~12%	$	128,853	$	128,853
LG Capital Funding, LLC	8%		4,264		8,707
WHC Capital, LLC	12%		116,936		116,936
Beaufort Capital Partners, LLC	12%		10,966		10,966
Tangiers Investment Group, LLC	0%~10%		48,393		48,394
GSM Fund Management, LLC	12%		35,309		38,442
Microcap Equity Group, LLC	10%		18,892		18,892
Virtual Technology Group, Ltd	24%		481,500		481,500
Gold Globe Investments Ltd	24%		2,324,000		2,324,000
Vista Capital Investments, LLC.	12%		5,800		5,800
Subtotal			3,174,913		3,182,489
Debt discount			-		(47,478	)
Total		$	3,174,913	$	3,135,011

Changes of debt discount

	Amount
December 31, 2016	$	47,478
Amortization		(47,478	)
June 30, 2017	$	-

XML

DERIVATIVE LIABILITIES NOTE CONVERSION FEATURE (Tables)

6 Months Ended

Jun. 30, 2017

Derivative Liabilities Note Conversion Feature Tables

Fair Value of the Liabilites using a Black-Scholes Valuation method

	December 31, 2016	June 30, 2017	Various Dates in 2017
Stock price on measurement date	$0.0001	$0.0001	$0.0001~0.0002
Exercise price	$0.00004~$0.00010	$0.00005	$0.00004~$0.00010
Discount rate	0.20%~0.36%	0.84%	0.20%~0.84%
Expected volatility	265%	257%~282%	257%~282%
Expected dividend yield	0.00%	0.00%	0.00%

Changes in fair value of the derivative financial instruments measured at fair value on a recurring basis

Fair value at December 31, 2016	$	1,173,213
Change in fair value of derivative liabilities		(732,829	)
Reclassification to equity		(7,703	)
Fair value at June 30, 2017	$	432,681

XML

BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Basic earnings (loss) per common share
Net income (loss) available to common shareholders	$ (366,359)	$ (16,199)	$ 52,184	$ (225,752)
Weighted average common shares outstanding	1,370,904,722	642,368,207	1,303,422,568	369,131,318
Basic earnings (loss) per common share	$ (0.00)	$ (0.00)	$ 0.00	$ (0.00)
Numerator:
Net income (loss) available to common shareholders	$ (366,359)	$ (16,199)	$ 52,184	$ (225,752)
Add convertible debt interest	184,282		324,515
Net income (loss) available to common shareholders	$ (182,077)	$ (16,199)	$ 376,699	$ (225,752)
Denominator:
Weighted average common shares outstanding	1,370,904,722	642,368,207	1,303,422,568	369,131,318
Preferred shares	$ 2,362		$ 2,362
Convertible Debt	$ 36,073,060,000		$ 36,073,060,000
Adjusted weighted average common shares outstanding	37,443,967,084	642,368,207	37,376,484,930	369,131,318
Diluted earnings (loss) per common share	$ (0.00)	$ (0.00)	$ 0.00	$ (0.00)

XML

BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Basis Of Presentation And Accounting Policies Details Narrative
State of Incorporation	Nevada
Date of incorporation	Dec. 13, 2006
Allowance for doubtful accounts	$ 5,521	$ 5,521
Estimated useful life - intangible assets	3 years
Earnings per share fully diluted	36,555,562,222
Preferred stock convertible	2,362

XML

GOING CONCERN (Details Narrative)	Jun. 30, 2017 USD ($)
Going Concern Details Narrative
Working capital deficit	$ (9,817,500)

XML

SETTLEMENT PAYABLE (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016	Dec. 20, 2013
Net proceeds from the sale	$ 933
Settlement payable	$ 2,162,159	$ 2,162,159
Tarpon [Member]
Accounts payable			$ 2,656,214
Proceeds from less applicable fees			75.00%
Aggregate Remittance Amount			$ 2,656,214
Issuance of shares for settlement of debt	5,136,000

XML

NOTES PAYABLE (Details) - USD ($)	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Notes Payable	$ 48,509	$ 163,350
Morchester International Limited One [Member]
Final Maturity	Jul. 14, 2012
Interest Rate	8.00%
Notes Payable	$ 10,000	10,000
Morchester International Limited
Final Maturity	Jul. 14, 2012
Interest Rate	15.00%
Notes Payable	$ 35,429	35,429
PowerUp Lending Group, Ltd. [Member]
Final Maturity	Feb. 22, 2017
Interest Rate	33.00%
Notes Payable		13,934
Auctus Private Equity Fund, LLC. [Member]
Final Maturity	Jun. 27, 2017
Notes Payable		25,758
PowerUp Lending Group, Ltd. One [Member]
Final Maturity	May 06, 2017
Interest Rate	46.00%
Notes Payable		42,999
PowerUp Lending Group, Ltd. Two [Member]
Final Maturity	Jul. 20, 2017
Interest Rate	46.00%
Notes Payable	$ 3,080	$ 35,230

XML

NOTES PAYABLE (Details 1) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Convertible notes payable	$ 3,174,913	$ 3,182,489
Debt discount		(47,478)
Total	3,174,913	3,135,011
JSJ Investments, Inc.
Convertible notes payable	128,853	128,853
Tangiers Investment Group, LLC [Member]
Convertible notes payable	48,393	48,394
LG Capital Funding, LLC [Member]
Convertible notes payable	$ 4,264	8,707
Interest Rate	8.00%
WHC Capital, LLC. [Member]
Convertible notes payable	$ 116,936	116,936
Interest Rate	12.00%
Beaufort Capital Partners, LLC. [Member]
Convertible notes payable	$ 10,966	10,966
Interest Rate	12.00%
GSM Fund Management, LLC [Member]
Convertible notes payable	$ 35,309	38,442
Interest Rate	12.00%
Microcap Equity Group, LLC [Member]
Convertible notes payable	$ 18,892	18,892
Interest Rate	10.00%
Virtual Technology Group, Ltd
Convertible notes payable	$ 481,500	481,500
Interest Rate	24.00%
Gold Globe Investments Ltd
Convertible notes payable	$ 2,324,000	2,324,000
Interest Rate	24.00%
Vista Capital Investments, LLC [Member]
Convertible notes payable	$ 5,800	$ 5,800
Interest Rate	12.00%
Minimum [Member] | JSJ Investments, Inc.
Interest Rate	10.00%
Minimum [Member] | Tangiers Investment Group, LLC [Member]
Interest Rate	0.00%
Maximum [Member] | JSJ Investments, Inc.
Interest Rate	12.00%
Maximum [Member] | Tangiers Investment Group, LLC [Member]
Interest Rate	10.00%

XML

NOTES PAYABLE (Details 2)	6 Months Ended
	Jun. 30, 2017 USD ($)
Notes Payable Details 2
Unamortized Discount, Beginning Balance	$ 47,478
Amortization	(47,478)
Unamortized Discount, Ending Balance

XML

NOTES PAYABLE (Details Narrative) - USD ($)						1 Months Ended										6 Months Ended	12 Months Ended
	Sep. 14, 2016	May 06, 2016	Nov. 10, 2014	Oct. 13, 2014	Sep. 02, 2014	Jul. 28, 2016	Feb. 23, 2015	Jan. 30, 2015	Jan. 20, 2015	Sep. 23, 2014	Aug. 21, 2014	Apr. 23, 2014	Apr. 15, 2014	Jan. 23, 2014	May 31, 2013	Jun. 30, 2017	Dec. 31, 2014	Dec. 31, 2016	Jun. 27, 2016	Sep. 23, 2015	Apr. 15, 2015	Jan. 23, 2015	Dec. 03, 2014	Jan. 27, 2014	Dec. 09, 2011	Sep. 05, 2008
Interest free loan																										$ 55,991
Issuance discount																		$ (47,478)
Principal note amount																								$ 247,500
Accrued interest																1,786
Advance from officer																3,400
Notes payable																									$ 292,929
JSJ Investments, Inc.
Convertible promissory note									$ 40,000						$ 50,000
Discount rate															50.00%
Trading days															120 days
Remaining amount of note															$ 10,670
JSJ Investments, Inc. One [Member]
Convertible promissory note											$ 50,000
Discount rate											60.00%
Cash redemption											150.00%
Interest rate											20.00%
JSJ Investments, Inc. Two [Member]
Discount rate									40.00%
Maturity date									Jan. 20, 2015
Cash redemption									150.00%
Loss on extinguishment of debt									$ 441
JSJ Investments, Inc. Two Three [Member]
Convertible promissory note									$ 60,000
Principal note amount																$ 32,623
Interest rate									12.00%
LG Capital Funding, LLC [Member]
Convertible promissory note			$ 37,000
Discount rate			50.00%
Trading days			180 days
Number of converted, shares issued																124,559,400
Converted shares, amount																$ 4,443
Accrued interest																$ 1,785
Interest rate																24.00%
Final settlement of convertible notes																$ 4,264
WHC Capital, LLC. [Member]
Convertible promissory note										$ 75,000
Principal note amount																$ 116,936
Discount rate										50.00%
Penalty amount																				$ 41,978
Interest rate										12.00%						22.00%
Final settlement of convertible notes																$ 116,936
Beaufort Capital Partners, LLC. [Member]
Convertible promissory note					$ 21,000
Principal note amount																10,966
Discount rate					50.00%
Trading days					15 days
Conversion price					Conversion price would be reset to $0.0001 or 65% off the lowest price of the previous five trading days
Final settlement of convertible notes																10,966
Tangiers Investment Group, LLC [Member]
Convertible promissory note				$ 55,000
Principal note amount																$ 15,393
Interest rate																20.00%
Tangiers [Member]
Convertible promissory note				$ 33,000
Discount rate				45.00%
Trading days				180 days
Interest rate				10.00%
GSM Fund Management, LLC [Member]
Convertible promissory note								$ 62,500
Discount rate								50.00%
Trading days								180 days
Number of converted, shares issued																63,947,338
Converted shares, amount																$ 3,133
Loss on extinguishment of debt								$ 52,364
Interest rate								12.00%								18.00%
Final settlement of convertible notes																$ 35,309
Microcap Equity Group, LLC [Member]
Convertible promissory note							$ 20,000
Discount rate							40.00%
Loss on extinguishment of debt							$ 28,213
Virtual Technology Group, Ltd
Convertible promissory note														$ 1,500,000
Amount of replacement note			$ 50,000					$ 62,500	$ 60,000					$ 20,000								$ 20,000
Discount rate														100.00%
Trading days														180 days
Conversion price																Company's common stock at a rate equal to 100% of the average of the closing bid prices for the seven trading days prior to the conversion date
Gold Globe Investments Ltd
Convertible promissory note														$ 2,800,000
Amount of replacement note																							$ 45,000
Discount rate														100.00%
Trading days														180 days
Vista Capital Investments, LLC [Member]
Convertible promissory note																					$ 250,000
Net proceeds												$ 25,000
Increase principal amount																					$ 10,000
Increase outstanding balance of note																					120.00%
Conversion price													Company's common stock at a rate equal to the lesser of $0.008 per share or 60% of the lowest trade occurring during the twenty-five consecutive trading days preceding the conversion date				The conversion price has been reset to $0.005 per share or 50% of the lowest trade occurring during the twenty-five consecutive trading days preceding the conversion date. Pursuant to the agreement, if the conversion price calculated under this agreement is less than $0.01 per share
PowerUp Lending Group, Ltd. Two [Member]
Maturity date																Jul. 20, 2017
Auctus Private Equity Fund, LLC. [Member]
Maturity date																Jun. 27, 2017
PowerUp Lending Group, Ltd. One [Member]
Maturity date																May 06, 2017
PowerUp Lending Group, Ltd. [Member]
Maturity date																Feb. 22, 2017
Morchester International Limited
Maturity date																Jul. 14, 2012
Morchester International Limited One [Member]
Maturity date																Jul. 14, 2012
Microcap Equity Group, LLC [Member]
Principal note amount																$ 18,892
Virtual Technology Group, Ltd
Principal note amount																$ 481,500
Interest rate																24.00%
Gold Globe Investments Ltd
Principal note amount																$ 2,324,000
Conversion price																Company's common stock at a rate equal to 100% of the average of the lowest three trading prices during the seven trading days prior to the conversion date
Interest rate																24.00%
Vista Capital Investments, LLC [Member]
Principal note amount																$ 5,800
Minimum [Member]
Interest rate																									8.00%
Maximum [Member]
Interest rate																									15.00%
Loan Three [Member]
Total repayment amount of note		$ 76,000
Loan agreement		60,000
Loans payable, daily amount		$ 360
Auctus [Member]
Principal note amount																25,758
Final settlement of convertible notes																			$ 61,819
Loan Four [Member]
Total repayment amount of note						$ 95,250
Loan agreement						75,000
Loans payable, daily amount						$ 451
Loan Five [Member]
Principal note amount																3,080
Total repayment amount of note	$ 63,500
Loan agreement	50,000
Loans payable, daily amount	$ 301
JSJ Investments, Inc. One [Member]
Principal note amount																45,560
JSJ Investments, Inc. Two [Member]
Principal note amount																$ 40,000

XML

DERIVATIVE LIABILITIES - NOTE CONVERSION FEATURE (Details) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Stock price on measurement date	$ 0.0001	$ 0.0001
Exercise Price	$ 0.00005
Discount rate	0.84%
Expected volatility		265.00%
Expected dividend yield	0.00%	0.00%
Minimum [Member]
Exercise Price		$ 0.00004
Discount rate		0.20%
Expected volatility	257.00%
Maximum [Member]
Exercise Price		$ 0.00010
Discount rate		0.36%
Expected volatility	282.00%
Various Dates in 2017 [Member]
Expected dividend yield	0.00%
Various Dates in 2017 [Member] | Minimum [Member]
Stock price on measurement date	$ 0.0001
Exercise Price	$ 0.00004
Discount rate	0.20%
Expected volatility	257.00%
Various Dates in 2017 [Member] | Maximum [Member]
Stock price on measurement date	$ 0.0002
Exercise Price	$ 0.00010
Discount rate	0.84%
Expected volatility	282.00%

XML

DERIVATIVE LIABILITIES - NOTE CONVERSION FEATURE (Details 1)	6 Months Ended
	Jun. 30, 2017 USD ($)
Derivative Liabilities - Note Conversion Feature Details 1
Fair value, Beginning Balance	$ 1,173,213
Change in fair value of derivative liabilities	(732,829)
Reclassification to equity	(7,703)
Fair value, Ending Balance	$ 432,681

XML

DERIVATIVE LIABILITIES - NOTE CONVERSION FEATURE (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Derivative Liabilities - Note Conversion Feature Details Narrative
Unrealized gain (loss) on derivative instrument	$ (732,829)	$ (373,622)

XML

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	Jul. 01, 2013	Jun. 30, 2017	Dec. 31, 2016	Sep. 28, 2016
Commitments And Contingencies Details Narrative
Lease expiry date	Oct. 31, 2019
Rent expense	$ 42,000
Rent deposit		$ 7,535	$ 7,535
Security deposit	$ 7,535
Civil penalties				$ 50,000

XML

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)						1 Months Ended				3 Months Ended		6 Months Ended		8 Months Ended
	Jul. 09, 2016	Nov. 10, 2014	Oct. 13, 2014	Sep. 02, 2014	May 15, 2013	Jan. 31, 2017	Jan. 30, 2015	Jan. 23, 2014	May 31, 2013	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Aug. 24, 2016	Dec. 31, 2016
Revenue										$ 167,794	$ 1,703,372	$ 324,128	$ 3,080,304
Other payable – related party										34,824		34,824
Beaufort Capital Partners, LLC. [Member]
Trading days				15 days
GMGI [Member]
Accounts payable - related parties	$ 20,000
Interest rate	5.00%
Trading days	180 days
LG Capital Funding, LLC [Member]
Trading days		180 days
Tangiers [Member]
Trading days			180 days
Virtual Technology Group, Ltd
Trading days								180 days
Gold Globe Investments Ltd
Trading days								180 days
GSM Fund Management, LLC [Member]
Trading days							180 days
JSJ Investments, Inc.
Trading days									120 days
Articulate [Member]
Accounts payable - related parties										2,119,298		2,119,298			1,611,815
Revenue												324,128	0
Receivable										74,148		74,148
Service fees														$ 10,000
Offset payable amount						$ 1,372,907
UTI [Member]
Revenue												0	3,080,304
Globaltech [Member]
Accounts payable - related parties										66,176		66,176
Receivable															31,352
Other payable – related party										34,824		34,824
Elmside [Member]
Accounts payable - related parties										55,991		55,991			55,991
Jay Goodman [Member]
Accounts payable - related parties										$ 148,500		148,500			$ 130,500
Service fees					$ 3,000
Brett Goodman [Member]
Consulting fees												$ 7,790	$ 29,750
Elray [Member]
Software usage fee percentage														0.50%

XML

EQUITY (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 29, 2015	Jun. 30, 2015	Sep. 18, 2014	Jun. 20, 2014	Jul. 14, 2013	Sep. 24, 2012	Jul. 01, 2012	May 03, 2012
Common Stock; Par Value	$ 0.001	$ 0.001
Other asset	$ 5,000	$ 5,000
Common Stock; Shares Issued	1,222,967,493	1,411,474,231
Notes payable		$ 7,576
Accrued interest		$ 1,786
Shares issued for conversion of notes payable		188,506,738
Tarpon [Member]
Preferred Stock; Shares Issued			5,136,000	4,101,000
Estimated market value	$ 6,669
Creditors claims	933
Loss on settlement of debt	$ 5,736
Series C Convertible Preferred Stock [Member]
Change in authorized share capital							10,000,000
Stock conversion rate							$ 0.0003
Preferred Stock; Shares Issued					5,000,000
Other asset					$ 5,000
Series B Convertible Preferred Stock [Member]
Change in authorized share capital										100,000,000
Estimated market value								$ 43,031
Series A Convertible Preferred Stock [Member]
Change in authorized share capital											300,000,000
Preferred Stock; Shares Authorized	300,000,000	300,000,000
Stock conversion rate											$ 0.0000003
Preferred Stock; Par Value	$ 0.001	$ 0.001
Preferred Stock; Shares Issued	0	0
Series B Convertible Preferred Stock [Member]
Change in authorized share capital									280,000,000
Preferred Stock; Shares Authorized	280,000,000	280,000,000
Stock conversion rate									$ 0.000000003
Preferred Stock; Par Value	$ 0.001	$ 0.001
Preferred Stock; Shares Issued	192,000,000	192,000,000
Series C Convertible Preferred Stock [Member]
Preferred Stock; Shares Authorized	10,000,000	10,000,000
Preferred Stock; Par Value	$ 0.001	$ 0.001
Preferred Stock; Shares Issued	7,083,333	7,083,333
Asialink Treasure Limited [Member] | Series C Convertible Preferred Stock [Member]
Preferred Stock; Par Value						$ 2,083
Preferred Stock; Shares Issued						2,083,333
Ownership percentage						49.00%
Global Tech Software Solutions LLC [Member] | Series C Convertible Preferred Stock [Member]
Ownership percentage						25.00%
Wagering generated by Golden Galaxy						1.00%