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~~September 30, 2018

¨ 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 o ¨ 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). o¨ 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 2,405,612,176 shares of common stock issued and outstanding as of ~~August~~March 1424, ~~2018~~2019.

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	15
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	17
ITEM 4.	CONTROLS AND PROCEDURES	17

PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	18
ITEM 1A.	RISK FACTORS	18
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	18
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	18
ITEM 4.	MINE SAFETY DISCLOSURES	18
ITEM 5.	OTHER INFORMATION	18
ITEM 6.	EXHIBITS	19

SIGNATURES		20

2 ~~Table of Contents~~

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ELRAY RESOURCES, INC.
Consolidated Balance Sheets
(Unaudited)
	June 30,			December 31,
	September 30,			December 31,
	2018			2017
ASSETS
Current assets:
Cash and cash equivalents	$	1617,~~593~~612		$	23,070
Accounts receivable –related parties		~~377~~440,~~122~~855			210,057
Prepaid expenses		9,971			13,988
Total current assents		~~403~~468,~~686~~438			247,115
Rent deposit		26,145			7,535
Total assets	$	~~429~~494,~~831~~583		$	254,650
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$	23,~~938~~131,~~410~~523		$	2,117,325
Accounts payable – related parties		3,~~088~~221,~~657~~308			2,684,009
Advances from shareholders		59,391			59,391
Other payable – related party		39,~~824~~825			34,824
Settlement payable		-			2,162,159
Short-term debt		1,689,905			-
Notes payable		45,429			45,429
Convertible notes payable, net of discounts		3,131,981			3,139,492
Derivative liabilities - note conversion feature		~~382~~3,~~618~~444,629			390,135
Total liabilities		1114,~~376~~763,~~215~~991			10,632,764
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, 2,405,612,176 and 2,255,390,469 shares issued and outstanding		2,405,612			2,255,390
Additional paid-in capital		15,721,464			15,856,664
Subscriptions receivable		(75,672	)		(75,672	)
Stock issuable		5,022			5,022
Accumulated deficit		(2932,~~201~~524,~~893~~917	)		(28,618,601	)
Total shareholders' deficit		(1014,~~946~~269,~~384~~408	)		(10,378,114	)
Total liabilities and shareholders' deficit	$	~~429~~494,~~831~~583		$	254,650

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

ELRAY RESOURCES, INC.

Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Revenues – related parties	$	9689,~~368~~733		$	~~167~~158,~~794~~921		$	~~245~~335,~~429~~162		$	~~324~~483,~~128~~049
Operating expenses:
General and administrative		~~166~~164,~~519~~700			~~353~~324,~~546~~440			~~462~~626,~~254~~954			~~616~~940,~~480~~920
Total operating expenses		~~166~~164,~~519~~700			~~353~~324,~~546~~440			~~462~~626,~~254~~954			~~616~~940,~~480~~920
Loss from operations		(7074,~~151~~967	)		(~~185~~165,~~752~~519	)		(~~216~~291,~~825~~792	)		(~~292~~457,~~352~~871	)
Other income (expense):
Interest expense		(~~184~~186,~~091~~046	)		(~~180~~189,~~484~~748	)		(~~366~~552,~~473~~519	)		(~~388~~578,~~293~~041	)
Gain (loss) on derivative liabilities – note conversion feature		(23,062,011	)		(~~123~~58,608	)		6(3,062,005	)		~~732~~674,~~829~~221
Total other income (expense)		(~~184~~3,~~093~~248,057	)		(~~180~~248,~~607~~356	)		(~~366~~3,~~467~~614,524	)		~~344~~96,~~536~~180
Net income (loss)	$	(~~254~~3,~~244~~323,024	)	$	(~~366~~413,~~359~~875	)	$	(~~583~~3,~~292~~906,316	)	$	52(361,~~184~~691	)
Earnings (loss) per common share – basic	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	0.00
Earnings (loss) per common share – basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Earnings (loss) per common share – diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	0.00
Weighted average number of common shares outstanding - basic and diluted		2,405,612,176			1,626,646,989			2,397,403,340			1,412,348,014
Weighted average number of common shares outstanding - basic		2,452,841,551			1,370,904,722			2,383,886,982			1,303,422,568
Weighted average number of common shares outstanding - diluted		2,452,841,551			1,370,904,722			2,383,886,982			37,376,484,930

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

ELRAY RESOURCES, INC.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Six Months Ended June 30,
	For the Nine Months Ended September 30,
	2018			2017
Cash flows from operating activities:
Net income (loss)	$	(~~583~~3,~~292~~906,316	)	$	52(361,~~184~~691	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operations activities:
Amortization of debt discount		-			47,478
Gain on derivative liabilities – note conversion feature		(63,062,005	)		(~~732~~674,~~829~~221	)
Changes in operating assets and liabilities:
Accounts receivable – related parties		(~~167~~230,~~065~~798	)		(4294,~~796~~217	)
Prepaid expenses		4,017			(765	)
Rent deposit		(18,610	)		-
Accounts payable and accrued liabilities		~~348~~541,~~831~~944			~~217~~408,~~551~~794
Accounts payable – related parties		~~404~~537,~~648~~299			~~525~~746,~~483~~781
Net cash provided by (used in) operating activities		(1110,~~477~~459	)		6672,~~306~~159
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 other payable – related party		10,000			34,824
Repayment of other payable – related party		(54,~~000~~999	)		-
Repayment of short-term notes payable		-			(~~114~~117,~~841~~921	)
Net cash provided by (used in) financing activities		5,~~000~~001			(8083,~~017~~097	)
Net increase (decrease) in cash and cash equivalents		(65,~~477~~458	)		14,~~484~~257
Cash and cash equivalents at beginning of period		23,070			18,297
Cash and cash equivalents at end of period	$	1617,~~593~~612		$	1922,~~781~~554
Supplemental disclosure of cash flows information:
Cash paid for interest	$	-		$	1427,~~790~~810
Cash paid for income taxes	$	-		$	-
Non-cash investing and financing activities:
Common stock issued for conversion of debt	$	7,511		$	939,~~362~~725
Reclassification of settlement payable	$	2,162,159		$	-5,022

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

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 the Asian market.

The accompanying unaudited interim consolidated financial statements of Elray 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”), including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in the Unites States of America (“U.S. GAAP”), have been condensed or omitted from these statements pursuant to such rules and regulations and accordingly, they do not include all the information and notes necessary for comprehensive financial statements 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, 2017 on Form 10-K filed on April 13, 2018.

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, 2017 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.

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.

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 statements of operations.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. A three-tier fair value hierarchy prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

	·	Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

	·	Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

	·	Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable.

Our financial instruments include cash, accounts receivable – related parties, accounts payable and accrued liabilities, notes payable, short term debt payable, convertible notes payable, advances from ~~shareholder~~shareholders, and derivative liabilities. The carrying values of these financial instruments approximate their fair value due to their short-term nature except for derivative liabilities. The derivative liabilities are stated at their fair value as a level 3 measurement. ~~The Company used a Black-Scholes model to determine the fair values of these derivative liabilities.~~

Table of Contents

Revenues

Prior to January 1, 2018, revenues were recognized when the four basic criteria for recognition were met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) consideration is fixed or determinable; and (4) collectability is reasonably assured. The Company adopted new accounting guidance for revenue recognition effective January 1, 2018 which did not have a material impact on the Company’s financial statements.

Beginning January 1, 2018, the Company analyzes contracts to determine the appropriate revenue recognition using the following steps: (i) identification of contracts with customers; (ii) identification of distinct performance obligations in the contract; (iii) determination of contract transaction price; (iv) allocation of contract transaction price to the performance obligations; and (v) determination of revenue recognition based on timing of satisfaction of the performance obligation. The Company recognizes revenues upon the satisfaction of its performance obligations (upon transfer of control of promised goods or services to customers) in an amount that reflects the consideration to which it expects to be entitled to in exchange for those goods or services.

All of the Company’s revenues for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 were related to intellectual properties (including CRM systems, payment gateway system and back office marketing systems) and related supporting services provided to one related party and were calculated based on end-users’ usage of online game content.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. On December 22, 2017, new federal tax reform legislation was enacted in the United States (the “2017 Tax Act”), resulting in significant changes from previous tax law. The 2017 Tax Act reduces the federal corporate income tax rate to a flat 21% effective January 1, 2018.

Tax benefits are initially recognized in the financial statements when it is more likely than not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially, and subsequently, measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority, assuming full knowledge of the position and all relevant facts. 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 and preferred stock is reflected in diluted earnings per share by application of the if-converted method.

7As ~~Table~~of September 30, 2018 and 2017, potentially diluted loss per share excludes notes convertible to 35,143,230,000 and 35,398,290,000 shares, respectively, of ~~Contents~~the Company’s common stock. As of September 30, 2018 and 2017, potentially dilutive securities also include preferred stock convertible to 2,362 and 2,362 shares of the Company’s common stock, respectively,

The following is a reconciliation of basic and diluted earnings (loss) per common share for the six and three months ended June 30, 2018 and 2017:

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Basic earnings (loss) per common share
Numerator:
Net income (loss) available to common shareholders	$	(254,244	)	$	(366,359	)	$	(583,292	)	$	52,184
Denominator:
Weighted average common shares outstanding		2,452,841,551			1,370,904,722			2,383,886,982			1,303,422,568
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	$	(254,244	)	$	(366,359	)	$	(583,292	)	$	52,184
Add convertible debt interest		-			-			-			324,515
Net income (loss) available to common shareholders	$	(254,244	)	$	(366,359	)	$	(583,292	)	$	376,699
Denominator:
Weighted average common shares outstanding		2,452,841,551			1,370,904,722			2,383,886,982			1,303,422,568
Preferred shares		-			-			-			2,362
Convertible debt		-			-			-			36,073,060,000
Adjusted weighted average common shares outstanding		2,452,841,551			1,370,904,722			2,383,886,982			37,376,484,930
Diluted earnings (loss) per common share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	0.00

For the three and six months ended June 30, 2018 fully diluted loss per share excludes notes convertible to 17,571,615,000 common shares and preferred stock convertible to 2,362 common shares, and for the three months ended June 30, 2017 fully diluted earnings per share excludes notes convertible to 36,073,060,000 common shares and preferred stock convertible to 2,362 common shares, because their inclusion would have been anti-dilutive.

Subsequent Events

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

Table of Contents

Recent Accounting Pronouncements

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 Table of Contents

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 sustained a loss of $~~583~~3,~~292~~906,316 for the ~~six~~nine months ended ~~June~~September 30, 2018. 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.

There were no shares issued to Tarpon during the nine months ended September 30, 2018 and 2017.

On May 17, 2018, the Company entered into a cancellation and release agreement with Tarpon. Pursuant to the agreement, the outstanding balance of the original notes and accounts payable of the Company shall continue to be an obligation of the Company. The Company reclassified $1,689,905 of the outstanding settlement payable to short-term debt and $472,254 of the outstanding settlement payable to accounts payable.

NOTE 4 – NOTES PAYABLE

Notes payable

Notes payable at ~~June~~September 30, 2018 and December 31, 2017 consisted of the following:

	Final Maturity	Interest Rate			~~June~~September 30, 2018		December 31, 2017
Morchester International Limited	July 14, 2012		15	%	$	35,429	$	35,429
Morchester International Limited	July 14, 2012		8	%		10,000		10,000
Total					$	45,429	$	45,429

Table of Contents

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. See Note 3. 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.

Convertible notes payable

Convertible notes payable, at ~~June~~September 30, 2018 and December 31, 2017, consisted of the following:

	Interest Rate			~~June~~September 30, 2018		December 31, 2017
JSJ Investments, Inc.	10%~20%		%	$	128,853	$	128,853
WHC Capital, LLC		22	%		116,936		116,936
Beaufort Capital Partners, LLC		12	%		10,966		10,966
Tangiers Investment Group, LLC		20	%		48,393		48,393
GSM Fund Management, LLC		18	%		10,879		18,390
Microcap Equity Group, LLC		10	%		4,654		4,654
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
Total				$	3,131,981	$	3,139,492

9 Table of Contents

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~~September 30, 2018, the remaining principal of $10,670 has not been converted. The note is currently in default. As of September 30, 2018, accrued interest of this note was $5,636. 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~~September 30, 2018, balance of this note was $45,560, accrued interest of this note was $36,837.

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~~September 30, 2018, balance of this note was $40,000, accrued interest of this note was $17,690.

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~~September 30, 2018, balance of this note was $32,623, accrued interest of this note was $13,915.

Table of Contents

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~~September 30, 2018, 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~~September 30, 2018, balance of this note was $10,966, accrued interest of this note was $13,716. 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~~September 30, 2018, balance of this note was $15,393, accrued interest of this note was $16,836. 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. As of ~~June~~September 30, 2018, balance of this note was $33,000, accrued interest of this note was $22,368.. This note is currently in default and has a default interest rate of 20% per annum.

10 Table of Contents

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. On April 9, 2018, the Company issued 150,221,707 shares of common stock for the conversion of this note in the amount of $7,511. As of ~~June~~September 30, 2018, balance of this note was $10,879, accrued interest of this note was $20,914. The note is currently in default and has a default interest rate of 18% per annum.

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~~September 30, 2018, balance of this note was $4,654, accrued interest of this note was $2,353. The note is currently in default. The default had no effect on the note’s interest rate.

Table of Contents

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~~September 30, 2018, balance of this note was $481,500. The note is currently in default 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~~September 30, 2018, balance of this note was $2,324,000, accrued interest of this note was $939,787. The note is currently in default 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~~September 30, 2018, balance of this note was $5,800 which matured on April 15, 2016, accrued interest of this note was $4,336. The note is currently in default. The default had no effect on the note’s interest rate.

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~~September 30, 2018 and December 31, 2017, the Company had advances of $3,400 from its officer. The advances form the officers are due on demand, unsecured with no interest.

11 Table of Contents

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~~11 ~~Company~~Table ~~remeasured the fair value~~ of the instrument as of June 30, 2018, and recorded an unrealized gain of $6 for the six months ended June 30, 2018. The Company determined the fair values of these liabilities using a Black-Scholes valuation model with the following assumptions:Contents

	December 31, 2017			June 30, 2018			April 9, 2018 (Note Conversion Date)
Stock price on measurement date	$	0.0001		$	0.0002		$	0.0001
Exercise price	$	0.00004~$0.00010		$	0.00008~$0.00020			0.00005
Discount rate		1.28	%		1.77	%		1.67	%
Expected volatility		248	%		248	%		248	%
Expected dividend yield		0.00	%		0.00	%		0.00	%

The Company remeasured the fair value of the instrument as of September 30, 2018, and recorded a loss of $3,062,005 for the nine months ended September 30, 2018. The Company determined the fair values of these liabilities using a Black-Scholes valuation model with the following assumptions:

	December 31, 2017			September 30, 2018			April 9, 2018 (Note Conversion Date)
Stock price on measurement date	$	0.0001		$	0.0001		$	0.0001
Exercise price	$	0.00004~$0.00010		$	0.00004~$0.00010			0.00005
Discount rate		1.28	%		2.36	%		1.67	%
Expected volatility		248	%		244	%		248	%
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, 2017	$	390,135
Conversion		(7,511	)
Change in fair value of derivative liabilities		(63,062,005	)
Fair value at June 30, 2018	$	382,618
Fair value at September 30, 2018	$	3,444,629

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 January 22, 2018, the Company entered into a lease agreement for an office located at Tenancy 2, Level 3, 2 Grosvenor Street, Bondi Junction, Australia. The Company pays approximately $68,585 per year plus applicable local sale tax and sharing expenses. The agreement, as amended, expires on November 14, 2020.

12 Table of Contents

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~~September 30, 2018 and December 31, 2017, loans from Elmside, a shareholder, were $55,991. The loans are currently in default.

Articulate Pty Ltd and Brian Goodman

As of ~~June~~September 30, 2018 and December 31, 2017, the Company had accounts payable of $23,~~903~~027,~~602~~808 and $2,517,509, 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. During the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, management fee to Articulate was $6090,000 and compensation to Mr. Brian Goodman was $~~129~~193,~~000~~500. For the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, consultant fees to Articulate was $~~120~~138,~~700~~169 and $~~191~~290,~~485~~208, respectively.

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. For the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, revenues from Articulate were $~~245~~335,~~429~~162 and $~~324~~483,~~128~~049, respectively. As of ~~June~~September 30, 2018 and December 31, 2017, receivable from Articulate for software usage fee was $~~377~~440,~~122~~855 and $210,057, respectively.

Table of Contents

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~~September, 2018 and December 31, 2017 the Company had $~~184~~193,500 and $166,500 payable to Jay Goodman, respectively.

On February 1, 2016, the Company entered into an agreement with Brett Goodman, 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~~nine months ended ~~June~~September 30, 2017, the Company paid $719,~~790~~290 consulting fees to Mr. Brett Goodman. During the ~~six~~nine months ended ~~June~~September 30, 2018, there was no consulting fee paid 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 ~~June~~September 30, 2018 and December 31, 2017, the Company had other payable to Globaltech of $39,824 and $34,824, respectively.

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~~September 30, 2018 and December 31, 2017, there were no Series A Preferred Stock outstanding.

13 Table of Contents

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 fair 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. During the year ended December 31, 2017, the management recorded an impairment of $5,000 due to the uncertain recoverability of the other asset.

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.

Table of Contents

Common Stock

As of ~~June~~September 30, 2018, 60,444,800 shares were yet to be delivered for the conversion of note principal of $2,000 and accrued interest of $1,022. The fair value of derivative – note conversion feature related to this conversion was $2,000.

During the ~~six~~nine months ended ~~June~~September 30, 2018, the Company issued 150,221,707 shares of common stock for the conversion of notes payable of $7,511. See Note 4.

NOTE 9 – CONCENTRATION

The Company’s revenues for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 were from one related party. As of ~~June~~September 30, 2018, the Company’s only customer is Articulate, a related party. Pursuant to the Company’s strategic partnership agreement with Articulate dated August 24, 2016, the agreement remains in full force indefinitely, or until a period of 12 months has lapsed after delivery of a written notice by either the Company or Articulate, terminating the agreement.

NOTE 10 – SUBSEQUENT EVENTS

On March 15, 2019, the Company engaged Heaton & Company, PLLC, dba Pinnacle Accountancy Group of Utah (“Pinnacle”) as its independent accountant to audit the Company’s financial statements and to perform reviews of interim financial statements. This change occurred in connection with GBH, the Company’s prior independent public accountants, resigning as a result of GBH combining its practice with Marcum effective July 1, 2018.

Table of Contents

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~~nine months ended ~~June~~September 30, 2018. 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, 2017 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.

Elray has been providing marketing and support for online gaming operations. 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.

On January 23, 2014, the Company entered into a Know-How and Asset Purchase Agreement, with VTG (“Virtual Technology Group, Ltd”) 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, and remains in full force indefinitely, or until a period of 12 months has lapsed after delivery of a written notice by either the Company or Articulate, terminating the agreement.

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.

Table of Contents

Results of Operations

Three months ended ~~June~~September 30, 2018 compared to the three months ended ~~June~~September 30, 2017.

Revenues

We generated $9689,~~368~~733 revenues during the three months ended ~~June~~September 30, 2018 compared to $~~167~~158,~~794~~921 for the three months ended ~~June~~September 30, 2017. Revenues were related to the marketing tools and CRM systems provided to a related party. Revenue was calculated based on software usage of end users. The usage decreased for the three months ended ~~June~~September 30, 2018 as compared to the three months ended ~~June~~September 30, 2017.

Operating expenses

During the three months ended ~~June~~September 30, 2018 and 2017, general and administrative expenses were $~~166~~164,~~519~~700 and $~~353~~324,~~546~~440, respectively. Decrease of general and administrative expense was mainly due to the decrease of consulting expense.

Interest expenses

During the three months ended ~~June~~September 30, 2018 and 2017, interest expense was $~~184~~186,~~091~~046 and $~~180~~189,~~484~~748, respectively. The increase of interest expense was mainly due to less amortization of debt discount on convertible debt during the three months ended ~~June~~September 30, 2018.

Gain on derivative liabilities - note conversion feature

~~Unrealized~~Loss ~~loss~~ on derivative liabilities - note conversion feature was $23,062,011 for the three months ended ~~June~~September 30, 2018 compared to a loss of $~~123~~58,608 for the three months ended ~~June~~September 30, 2017. The change was primarily resulted from the ~~fluctuation~~changing of the ~~Company’s~~estimation ~~stock~~for ~~price~~term of the convertible notes.

Net loss

We had a net loss of $~~254~~3,~~244~~323,024 and $~~366~~ 413,~~359~~875 for the three months ended ~~June~~September 30, 2018 and 2017, respectively. The decrease of net loss in 2018 was as a result of the items discussed above.

~~Six~~Nine months ended ~~June~~September 30, 2018 compared to the ~~six~~nine months ended ~~June~~September 30, 2017.

Revenues

We generated $~~245~~335,~~429~~162 revenues during the ~~six~~nine months ended ~~June~~September 30, 2018 compared to $~~324~~483,~~128~~049 for ~~six~~nine months ended ~~June~~ September 30, 2017. Revenues for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 were related to the marketing tools and CRM systems provided to a related party. Revenue was calculated based on software usage of end users. The usage decreased for the ~~six~~nine months ended ~~June~~September 30, 2018 as compared to the ~~six~~nine months ended ~~June~~September 30, 2017.

Operating Expenses

During the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, general and administrative expenses were $~~462~~626,~~254~~952 and $~~616~~940,~~480~~920, respectively. Decrease of general and administrative expense was mainly attributable to the decrease of consulting expense and legal fees.

Interest Expenses

During the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, interest expense was $~~366~~552,~~473~~519 and $~~388~~578,~~293~~041, respectively. The decrease of interest expense was mainly due to less amortization of debt discount on convertible debt during the ~~six~~nine months ended ~~June~~September 30, 2018.

Unrealized Gain on Derivative Liabilities - Note Conversion Feature

~~Unrealized~~Loss ~~gain~~ on derivative liabilities - note conversion feature was $63,062,006 for the ~~six~~nine months ended ~~June~~September 30, 2018 compared to a gain of $~~732~~674,~~829~~221 for the ~~six~~nine months ended ~~June~~September 30, 2017. The change was primarily resulted from the ~~fluctuation~~changing of the ~~Company’s~~estimation ~~stock~~for ~~price~~term of the convertible notes.

Net Loss

We had a net loss of $~~583~~3,~~292~~906,316 and ~~a net income of~~ $52361,~~184~~691 for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, respectively. The ~~decrease~~increase of net ~~income~~loss in 2018 was as a result of the items discussed above.

Table of Contents

Liquidity and Capital Resources

The Company had $1617,~~593~~612 cash on hand at ~~June~~September 30, 2018.

Our cash used in operating activities for the ~~six~~nine months ended ~~June~~September 30, 2018 was $1110,~~477~~459 compared to $6672,~~306~~159 cash provided by operating activities for the ~~six~~nine months ended ~~June~~September 30, 2017. The decrease was primarily due to changes in net operating asset and liabilities.

Our cash provided by investing activities for the ~~six~~nine months ended ~~June~~September 30, 2017 was $15,195, represents collection of note receivable from a related party. We did not have any investing activities during the ~~six~~nine months ended ~~June~~September 30, 2018.

Our cash provided by financing activities for the ~~six~~nine months ended ~~June~~September 30, 2018 was $5,~~000~~001 compared to $8083,~~017~~097 cash used in financing activities for the ~~six~~nine months ended ~~June~~September 30, 2017. The change was mainly related to the decrease of payments on short-term loans.

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~~September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

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~~nine months ended ~~June~~September 30, 2018, the Company issued 150,221,707 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.

Table of Contents

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

Table of Contents

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 17, 2018	By:	/s/ Anthony Goodman
Date: March 29, 2019	By:	/s/ Anthony Goodman
		Anthony Goodman,
		Anthony Goodman
		President and Chief Financial Officer

Filing Compare · ELRAY RESOURCES, INC.