NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2016
NOTE
1: ORGANIZATION, DESCRIPTION OF BUSINESS, GOING CONCERN AND BASIS OF PRESENTATION
NuState
Energy Holdings, Inc.
,
or the Company, currently is a Florida corporation that was incorporated in Nevada in October 1987.
It was formerly known as Jaguar Investments, Inc. between October 1987 and May 2003, Power2Ship, Inc. between May 2003 and November
2006, and Fittipaldi Logistics, Inc. between November 2006 and December 2007.
The
accompanying financial statements have been prepared on a going concern basis. For the three months ended September 30, 2016 the
Company had a net loss of $686,964 and had net cash used in operating activities of $41,806. In addition, the Company had an accumulated
deficit and a working capital deficit of approximately $42.2 million and $4.3 million, respectively, at September 30, 2016.
These
matters raise substantial doubt about the Company’s ability to continue as a going concern.
The Company’s ability
to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay
its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate
profitable operations in the future. Management plans to provide for the Company’s capital requirements by continuing to
issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances
that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results.
The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
Basis
of Presentation
The
unaudited interim financial information furnished herein reflects all adjustments, consisting only of normal recurring items,
which in the opinion of management are necessary to fairly state NuState Energy Holdings, Inc.’s (the “Company”
or “we”, “us” or “our”) financial position, results of operations and cash flows for the dates
and periods presented and to make such information not misleading. Certain information and footnote disclosures normally included
in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America
have been omitted pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”), nevertheless,
management of the Company believes that the disclosures herein are adequate to make the information presented not misleading.
These
unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the year
ended June 30, 2016, contained in the Company’s Annual Report on Form 10-K/A filed with the SEC on October 14, 2016. The
results of operations for the three months ended September 30, 2016, are not necessarily indicative of results to be expected
for any other interim period or the fiscal year ending June 30, 2017.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING 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 and disclosure
of contingent assets and liabilities at the date of the financial statements and the reporting amounts of revenues and expenses
during the reported period. Actual results will differ from those estimates. Included in these estimates are the valuation of
derivative liabilities, stock-based compensation, and deferred tax asset valuation allowance..
Cash
and Cash Equivalents
The
Company considers all highly liquid, temporary, cash equivalents with an original maturity of three months or less when purchased,
to be cash equivalents. The Company had no cash equivalents during the three months ended September 30, 2016 and 2015.
Concentration
of Credit Risks
The
Company is subject to a concentration of credit risk from cash.
The
Company’s cash account is held at a financial institution and is insured by the Federal Deposit Insurance Corporation, or
FDIC, up to $250,000. During the three months ended September 30, 2016 and 2015, the Company had not reached a bank balance exceeding
the FDIC insurance limit.
Derivative
Liabilities
The
Company assessed the classification of its derivative financial instruments as of September 30, 2016 and 2015, which consist of
convertible instruments and rights to shares of the Company’s common stock, and determined that such derivatives meet the
criteria for liability classification under ASC 815.
ASC
815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments
and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a)
the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic
characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument
and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with
changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception
to this rule when the host instrument is deemed to be conventional, as described.
NUSTATE
ENERGY HOLDINGS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2016
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Fair
Value of Financial Instruments
The
Company accounts, for assets and liabilities measured at fair value on a recurring basis, in accordance with ASC Topic 820, Fair
Value Measurements and Disclosures, or ASC 820. ASC 820 establishes a common definition for fair value to be applied to existing
generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring
fair value, and expands disclosure about such fair value measurements.
ASC
820 defines fair value 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. Additionally, ASC 820 requires the use of valuation techniques that maximize
the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level
1:
|
Observable
inputs such as quoted market prices in active markets for identical assets or liabilities.
|
|
|
Level
2:
|
Observable
market-based inputs or unobservable inputs that are corroborated by market data.
|
|
|
Level
3:
|
Unobservable
inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
|
The
Company’s derivative liability at September 30, 2016 and 2015 is classified as Level 3 financial instrument.
Additional
Disclosures Regarding Fair Value Measurements
The
carrying value of cash and cash equivalents, other receivable, accounts payable and accrued expenses, accrued compensation, note
and convertible promissory notes payable, and liabilities from discontinued operations approximate their fair value due to the
short maturity of these items.
Convertible
Instruments
The
Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated
from their host instruments) in accordance with ASC 470-20, Debt with Conversion and Other Options. Accordingly, the Company records,
when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based
upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and
the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the
related debt to their earliest date of redemption. The Company also records deemed dividends for the intrinsic value of conversion
options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment
date of the note transaction and the effective conversion price embedded in the note.
ASC
815-40, Contracts in Entity’s own Equity, generally provides that, among other things, if an event is not within the entity’s
control, such contract could require net cash settlement and shall be classified as an asset or a liability.
The
Company determines whether the instruments issued in the transactions are considered indexed to the Company’s own stock.
During the fiscal years 2015 and 2016 the Company issued convertible securities with variable conversion provisions that resulted
in derivative liabilities.
Income
Taxes
The
Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires,
among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires
the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred
tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The
Company follows the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions”. When tax returns are
filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others
are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.
In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the
period during which, based on all available evidence, management believes it is more likely than not that the position will be
sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset
or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the
largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing
authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above
should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest
and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all
highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
NUSTATE
ENERGY HOLDINGS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2016
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Income
Taxes, continued
The
Company has adopted ASC 740-10-25,
“
Definition of Settlement”
,
which provides guidance on how an entity
should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits
and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without
being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax
benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical
merits and the statute of limitations remains open. As of September 30, 2016, the Company had not filed tax returns for the tax
years ending June 30, 2008 through 2016 and such returns, when filed, potentially will be subject to audit by the taxing authorities
for a minimum of three years beyond the filing date under the three-year statute of limitations. The Company has not accrued any
potential tax penalties associated with not filing these tax returns. Due to recurring losses, management believes such potential
tax penalties, in any, would not be material in amount.
Share-Based
Payment
The
Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation, or ASC 718. Under
the fair value recognition provisions of this topic, stock-based compensation cost is measured at the grant date based on the
fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is the
vesting period.
The
Company has elected to use the Black-Scholes-Merton, or BSM, option-pricing model to estimate the fair value of its options, which
incorporates various subjective assumptions including volatility, risk-free interest rate, expected life, and dividend yield to
calculate the fair value of stock option awards. Compensation expense recognized in the statements of operations is based on awards
ultimately expected to vest and reflects estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant
and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Segment
Reporting
The
Company operates in one segment, which is to search for possible acquisition targets and merge with an operating company. The
Company’s chief operating decision-maker evaluates the performance of the Company based upon expenses by functional areas
as disclosed in the Company’s statements of operations.
Recent
Accounting Pronouncements
Recent
accounting pronouncements have been issued but deemed by management to be outside the scope of relevance to the Company.
As
an emerging growth company, we have elected to use the exemption provided for in the Jumpstart Our Business Startups Act or JOBS
Act allowing us to delay the adoption of new or revised accounting standards that have different effective dates for public and
private companies until those standards apply to private companies pursuant to Section 102(b)(1) of the Act.
NUSTATE
ENERGY HOLDINGS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2016
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Basic
and Diluted Earnings Per Share
Basic
earnings per share are calculated by dividing income available to stockholders by the weighted-average number of shares of Common
Stock outstanding during each period. Diluted earnings per share are computed using the weighted average number of shares of Common
Stock and dilutive Common Stock share equivalents outstanding during the period. Dilutive Common Stock share equivalents consist
of shares issuable upon the exercise of stock options and warrants (calculated using the modified-treasury stock method), and
shares underlying convertible promissory notes and convertible preferred stock. Potential common shares includable in the computation
of fully-diluted per-share results are not presented in the financial statements as their affect would be anti-dilutive.
|
|
For
the Three Months ended
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(853,311
|
)
|
|
$
|
(149,224
|
)
|
Interest expense
|
|
|
(84,200
|
)
|
|
|
(78,584
|
)
|
Loss on debt settlement
|
|
|
-
|
|
|
|
(12,135
|
)
|
Gain on change in fair value of derivative liability
|
|
|
250,548
|
|
|
|
5,207
|
|
Numerator for
basic earnings per share- net loss from continuing operations attributable to common stockholders-as adjusted
|
|
$
|
(686,964
|
)
|
|
$
|
(234,737
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share-weighted
average shares
|
|
|
19,509,598
|
|
|
|
145,130
|
|
Effect of dilutive securities-when applicable:
|
|
|
|
|
|
|
|
|
Convertible promissory notes
|
|
|
49,837,385
|
|
|
|
4,134,231
|
|
Preferred Stock
|
|
|
13,754
|
|
|
|
44,069
|
|
Denominator for diluted earnings per share—adjusted
weighted-average shares and assumed conversions
|
|
|
69,360,742
|
|
|
|
4,503,430
|
|
The
weighted-average potentially dilutive common share equivalents outstanding for the three months ended September 30, 2016 and 2015
are as follows:
|
|
September
30,
|
|
|
|
2016
|
|
|
2015
|
|
Series A Preferred Stock
|
|
|
9,324
|
|
|
|
-
|
|
Series B Preferred Stock
|
|
|
4,430
|
|
|
|
1,995
|
|
Series C Preferred Stock
|
|
|
-
|
|
|
|
22
|
|
Series D Preferred Stock
|
|
|
-
|
|
|
|
12,667
|
|
Series F Preferred Stock
|
|
|
-
|
|
|
|
17,130
|
|
Series H Preferred Stock
|
|
|
-
|
|
|
|
1,864
|
|
Series I Preferred Stock
|
|
|
-
|
|
|
|
10,000
|
|
Series J Preferred Stock
|
|
|
-
|
|
|
|
333
|
|
Series Y Preferred Stock
|
|
|
-
|
|
|
|
58
|
|
Convertible notes payable
|
|
|
49,837,385
|
|
|
|
4,134,231
|
|
Total
|
|
|
49,851,144
|
|
|
|
4,178,300
|
|
NUSTATE
ENERGY HOLDINGS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2016
NOTE
3: DERIVATIVE LIABILITY
The
Company accounts for the embedded conversion features included in its convertible instruments as derivative liabilities. The aggregate
fair value of derivative liabilities at September 30, 2016 and June 30, 2016 amounted to $385,548 and $636,096, respectively.
For the three months ended September 30, 2016 and 2015, the Company recorded a gain related to the change in fair value of the
derivative liability amounting to $250,548 and $5,207, respectively. At each measurement date, the fair value of the embedded
conversion features was based on the Black-Scholes-Merton method using the following assumptions:
|
|
Three
Months Ended September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Effective Exercise price
|
|
$
|
.00005
|
|
|
$
|
.00015
|
|
Effective Market price
|
|
$
|
.0001
|
|
|
$
|
.0014
|
|
Volatility
|
|
|
401
|
%
|
|
|
503
|
%
|
Risk-free interest
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
Terms
|
|
|
365
days
|
|
|
|
365
days
|
|
Expected dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
Changes
in the derivative liabilities during the three months ended September 30, 2016 and 2015 are as follows:
Derivative liability at June 30, 2016
|
|
$
|
636,096
|
|
Gain on change
in fair value of derivative liability, recognized as other income
|
|
|
(250,548
|
)
|
Derivative liability at September 30, 2016
|
|
$
|
385,548
|
|
Derivative liability at June 30, 2015
|
|
$
|
295,808
|
|
Gain on change
in fair value of derivative liability, recognized as other income
|
|
|
(5,207
|
)
|
Derivative liability at September 30, 2015
|
|
$
|
290,601
|
|
NOTE
4: ACCRUED INTEREST PAYABLE
Changes
in accrued interest payable during the three months ended September 30, 2016 and 2015 are as follows:
Accrued interest payable
at June 30, 2016
|
|
$
|
1,235,330
|
|
Interest expense for the three months ended September 30, 2016,
net of amortization of debt discount of $24,167
|
|
|
60,033
|
|
Accrued interest payable at September
30, 2016
|
|
$
|
1,295,363
|
|
Accrued interest payable
at June 30, 2015
|
|
$
|
778,462
|
|
Return of accrued interest from liability
due to ASC Recap
|
|
|
689,218
|
|
Interest expense for the three months ended September 30, 2015
|
|
|
78,584
|
|
Accrued interest payable at September
30, 2015
|
|
$
|
1,546,264
|
|
NOTE
5: CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE
Convertible
Notes Payable
During
the three months ended September 30, 2016 and 2015, the Company had notes payable outstanding in which the conversion rate was
variable and undeterminable. Accordingly, the Company has recognized a derivative liability in connection with such instruments.
The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance and at every balance
sheet thereafter and in determining which valuation method is most appropriate for the instrument (e.g., Black-Scholes-Merton),
the expected volatility, the implied risk free interest rate, as well as the expected dividend rate, if any.
At
September 30, 2016 and June 30, 2016 convertible debentures consisted of the following:
|
|
September
30, 2016
|
|
|
June
30, 2016
|
|
Convertible
notes payable
|
|
$
|
1,590,751
|
|
|
$
|
1,609,349
|
|
Convertible notes payable
to ASC Recap
|
|
|
147,965
|
|
|
|
147,965
|
|
Unamortized
debt discount
|
|
|
(84,583
|
)
|
|
|
(108,750
|
)
|
Total
|
|
$
|
1,654,133
|
|
|
$
|
1,648,564
|
|
NUSTATE
ENERGY HOLDINGS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2016
NOTE
5: CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE, continued
The
Company had convertible promissory notes aggregating approximately $1.6 million and $1.6 million at September 30, 2016 and June
30, 2016, respectively. The accrued interest amounted to approximately $1,091,000 and $1,036,000 at September 30, 2016 and June
30, 2016, respectively. The Convertible Notes Payable bear interest at rates ranging between 8% and 18% per annum. Interest is
generally payable monthly. The Convertible Notes Payable are generally convertible at rates ranging from $0.005 to $0.0267 per
share, at the holders’ option. At September 30, 2016, approximately $1.6 million of convertible promissory notes had matured,
are in default, and remain unpaid.
Notes
Payable
The
Company had promissory notes aggregating $280,241 at September 30, 2016 and June 30, 2016, respectively. The related accrued interest
amounted to approximately $205,000 and $200,000 at September 30, 2016 and June 30, 2016, respectively. The notes payable bear
interest at rates ranging from 12.5% to 16% per annum which is payable monthly. All promissory notes outstanding as of September
30, 2016 have matured, are in default, and remain unpaid.
Transactions
During
the three months ended September 30, 2016 we issued convertible notes to four investors, totaling $40,000. The notes bear interest
at 8% and have a term of sixty days.
The
Company recognized interest expense of $84,200 and $78,584 during the three-month periods ended September 30, 2016 and 2015, respectively
which included debt discount amortization of $24,167 and $0 during the three-month period ended September 30, 2016 and 2015, respectively.
NOTE
6: OBLIGATIONS TO ASC RECAP, LLC
In
July, 2013, certain of the Company’s creditors showed interest in selling their claims against the Company to ASC Recap,
LLC (“ASC”); this group also included both current and past management of the Company. This led to the Company signing
a Liability Purchase Agreement with ASC on July 23, 2013. This Agreement required the Company to issue common shares within five
business days of each purchase at a 25% discount from the market price to ASC in amounts equal to the claims purchased from the
Company’s creditors. In addition, under the terms of the Agreement, the Company issued a $25,000 non-interest bearing convertible
promissory note to ASC, as described in Note 5.
ASC
signed a series of Claim Purchase Agreements with certain creditors of the Company to purchase their claims against the Company
totaling $2,531,565. These claims consisted of notes payable, convertible notes payable, vendor payables and accrued compensation
to the Company’s CEO and to a related party. The Claim Purchase Agreements required ASC to settle the creditors’ claims
against the Company for a total of $1,305,996. Each Claim Purchase Agreement stipulated that ASC would pay each creditor the agreed-upon
amount in up to twelve (12) monthly installments.
In
January, 2015, the Company had not issued any shares to ASC as required by the agreement. As a result, ASC filed a complaint in
Leon County, Florida demanding the prescribed issuance of shares from the Company for the purchased claims. A settlement agreement
was reached on February 6, 2015, and on March 12, 2015 ASC Recap filed a motion in Leon County, Florida which forced the Company
to comply. ASC Recap was awarded a $2,531,565 judgement which was to be paid by issuing free trading common stock at a 25% discount
from the market price
.
In addition, on May 6, 2015, the Company issued a $125,000 non-interest bearing convertible
promissory note to ASC, as described in Note 4. Between April and June of 2015, the Company issued to ASC 322,220,000 shares of
common stock with an aggregate market value of $365,308, which reduced the recorded liability by $273,981; in July of 2015, the
Company issued 82,980,000 shares of common stock with an aggregate market value of $24,894 (see Note 7).
On
August 13, 2015 ASC Recap, LLC issued the Company a letter of default related to its agreement to settle outstanding liabilities
and related accrued interest and returned approximately $2,373,000 of liabilities to their original holders, which is detailed
in the table at the end of Note 6. These balances reflect the payments made by ASC to creditors prior to the default.
NUSTATE
ENERGY HOLDINGS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2016
NOTE
6: OBLIGATIONS TO ASC RECAP, LLC, continued
An
analysis of the settlement liability due to ASC is as follows:
Total creditor claims purchased
by ASC - as ratified by the settlement agreement dated February 6, 2015
|
|
|
|
|
|
$
|
2,531,565
|
|
|
|
|
|
|
|
|
|
|
Reduction of liability by shares issued
between April and June 2015:
|
|
|
|
|
|
|
|
|
Market value of 322,220,000 common shares
issued
|
|
$
|
365,308
|
|
|
|
|
|
Less 25% discount
as per settlement agreement
|
|
|
(91,327
|
)
|
|
|
(273,981
|
)
|
|
|
|
|
|
|
|
|
|
Cash Payments and adjustments
|
|
|
|
|
|
|
(50,599
|
)
|
|
|
|
|
|
|
|
|
|
Liability after issuances of shares,
cash payments, and adjustments
|
|
|
|
|
|
|
2,206,985
|
|
|
|
|
|
|
|
|
|
|
Add back the previous reduction of liability
by shares issued in consideration of ASC waiving its right to additional shares under the settlement agreement
|
|
|
|
|
|
|
273,981
|
|
|
|
|
|
|
|
|
|
|
Liability as of June 30, 2015 agreed
to by the Company and ASC
|
|
|
|
|
|
|
2,480,966
|
|
|
|
|
|
|
|
|
|
|
Increase in recorded liability by the
market value of 82,980,000 common shares issued during July 2015
|
|
|
|
|
|
|
24,894
|
|
|
|
|
|
|
|
|
|
|
Carrying value of settlement liability
due to ASC at June 30, 2015
|
|
|
|
|
|
|
2,505,860
|
|
|
|
|
|
|
|
|
|
|
Reduction of liability by shares issued
in September 2015:
|
|
|
|
|
|
|
|
|
Cash payments and adjustments
|
|
|
|
|
|
|
(133,347
|
)
|
Carrying value of settlement liability
due to ASC at June 30, 2015
|
|
|
|
|
|
$
|
2,372,513
|
|
|
|
|
|
|
|
|
|
|
Transfer of liability
due to ASC to Original debt-holders
|
|
|
|
|
|
|
(2,372,513
|
)
|
Carrying value of settlement liability
due to ASC at September 30, 2016
|
|
|
|
|
|
$
|
-
|
|
The
transfer of liability due to ASC Recap consisted of the following:
Convertible notes payable
|
|
$
|
677,146
|
|
Short term notes payable
|
|
|
225,000
|
|
Accounts payable and accrued liabilities
|
|
|
90,360
|
|
Accrued salaries
|
|
|
702,924
|
|
Loss on settlement of ASC liability
|
|
|
(12,135
|
)
|
Accrued interest payable
|
|
|
689,218
|
|
|
|
$
|
2,372,513
|
|
NOTE
7: STOCKHOLDERS’ DEFICIT
Common
Stock
The
Company’s Certificate of Incorporation was amended on July 20, 2016 to increase the number of authorized shares of common
stock from 13,333,333 shares to two hundred fifty million (250,000,000) shares.
On
August 15, 2016 the Company issued 20,000,000 shares of its common stock to its CEO, Kevin Yates, as compensation. The shares
were valued at $0.03 per share, the market price of the common stock on the date of issuance for a total value of $600,000. This
expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 –
Related Party Transactions.
On
August 15, 2016 the Company issued 5,000,000 shares of its common stock to its newly appointed CFO, Mark Lucky, as compensation.
The shares were valued at $0.03 per share, the market price of the common stock on the date of issuance for a total value of $150,000.
This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note
8 – Related Party Transactions.
On
August 15, 2016 the Company issued 2,000,000 shares of its common stock to its former CEO, Kathleen Roberton, pursuant to a settlement
agreement, for unpaid wages. Per agreement, the shares were valued at $0.04 per share for a total value of $80,000.
During
the three months ended September 30, 2016 the Company issued 4,799,504 shares of its common stock related to the conversion of
$18,597 of principal of its convertible notes payable, at an average contract conversion price of $0.00387.
NUSTATE
ENERGY HOLDINGS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2016
NOTE
7: STOCKHOLDERS’ DEFICIT, continued
Preferred
Stock
Series
A and B issued and outstanding shares of the Company’s preferred stock have a par value of $0.001. The Companies preferred
shares Series C, D, F, H. I. J. and Y were exchanged for shares of Series A preferred stock in November, 2015. These classes of
shares were subsequently cancelled. Issued and outstanding shares of Series C, D, F, H. I. J. and Y of the Company’s preferred
stock had a par value of $0.01 per share. All classes rank(ed) prior to any class or series of the Company’s common stock
as to the distribution of assets upon liquidation, dissolution or winding up of the Company or as to the payment of dividends.
All preferred stock shall have no voting rights except if the subject of such vote would reduce the amount payable to the holders
of preferred stock upon liquidation or dissolution of the company and cancel and modify the conversion rights of the holders of
preferred stock as defined in the certificate of designations of the respective series of preferred stock.
On
October 14, 2015 a former Chairman of the Board of the Company was issued 80 shares of Series F preferred stock with a stated
value of $5,000 and a par value $0.001 per share, and 12 shares of Series H preferred stock, with a stated value of $1,000 and
a par value $0.001 per share in consideration for his forgiveness of $412,000 in accrued compensation. Subsequently, in October
2015, these Series F and Series H shares were exchanged for 1,648,000 shares of Series A preferred stock.
On
October 28, 2015, preferred shareholders representing a majority of each series of our outstanding preferred stock, voted to cancel
all their shares of preferred stock in exchange for 11,181,340 shares of newly designated Series A preferred stock. The number
of shares of newly issued Series A preferred stock issued to each preferred shareholder was calculated by dividing the total stated
value of their preferred shares by $0.25. The holders of the Series A preferred shares are restricted from converting their shares
to common stock for two years (the “Lock-Up Period”). After the Lock-Up Period, they may convert up to one percent
of their Series A preferred shares into common shares on a one for one basis each month for four years (the “Leak-Out Period”).
However, the conversion price automatically reduces by 86% to $0.035 per share if our common stock is below $0.10 per share. At
the end of the Leak-Out Period, up to all of the remaining Series A preferred shares may be converted to common stock at the shareholders’
discretion.
Class
|
|
Shares
Cancelled
|
|
|
Shares
of
Series A Issued
|
|
Series B
|
|
|
(149,600
|
)
|
|
|
2,992,000
|
|
Series C
|
|
|
(332
|
)
|
|
|
39,840
|
|
Series D
|
|
|
(19
|
)
|
|
|
1,900,000
|
|
Series F
|
|
|
(234
|
)
|
|
|
4,689,500
|
|
Series H
|
|
|
(85
|
)
|
|
|
340,000
|
|
Series I
|
|
|
(30,000
|
)
|
|
|
1,200,000
|
|
Series J
|
|
|
(2
|
)
|
|
|
20,000
|
|
Total
|
|
|
|
|
|
|
11,181,340
|
|
On
October 28, 2015 the 87,000 shares of Series Y preferred stock, owned by the Company’s former Chairman of the Board, were
exchanged for 87,000 shares of Series A preferred stock. These shares of Series A preferred stock were valued at their fair market
value of $8.70.
In
November, 2015, we sold 40,000 shares of Series A preferred stock to one investor for $10,000 and sold 100,000 shares of Series
B preferred stock to another investor for $25,000.
Series
A Preferred Stock
The
Series A Preferred Stock has a stated value of $0.25 per share. Each one share of Series A Preferred Stock is convertible into
one (1) share of Common Stock. In the event the Common Stock price per share is lower than $0.10 (ten cents) per share then the
Conversion shall be set at $0.035 per share. The Common Stock shares are governed by Lock-Up/Leak-Out Agreements.
NUSTATE
ENERGY HOLDINGS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2016
NOTE
7: STOCKHOLDERS’ DEFICIT, continued
Series
B Preferred Stock
Prior
to cancellation, the Series B Preferred Stock had a stated value of $5.00 per share. Each share of Series B Preferred Stock was
convertible into 20 shares of the Company’s common stock. In addition, the holders of the preferred stock were entitled
to receive annual cumulative dividends of 10% payable in cash or shares of the Company’s common stock, at the Company’s
option. At June 30, 2016, the Company had not declared the payment of cumulative dividends aggregating approximately $673,200.
Thirty
million (30,000,000) shares of preferred stock were designated as a new Series B Preferred stock in April, 2016. This new Series
B Preferred Stock has a $0.001 par value, and each 300 shares is convertible into one share of the Company’s common stock,
with a stated value of $375 per share.
Series
C Preferred Stock
Prior
to cancellation, the Series C Preferred Stock had a stated value of $30.00 per share. Each share of Series C Preferred Stock was
convertible into 100 shares of the Company’s common stock.
Series
D Preferred Stock
Prior
to cancellation, the Series D Preferred Stock had a stated value of $25,000 per share. Each share of the Series D Preferred Stock
was convertible into 1,000,000 shares of the Company’s common stock. In addition, the holders of the Series D Preferred
Stock were entitled to receive a participation interest in the annual net profits generated from any future business activities
undertaken by the Company in Brazil.
Series
F Preferred Stock
Prior
to cancellation, the Series F Preferred Stock had a stated value of $5,000 per share. Each share of Series F Preferred Stock was
convertible into 200,000 shares of the Company’s common stock.
Series
H Preferred Stock
Prior
to cancellation, the Series H Preferred Stock had a stated value of $1,000 per share. Each share of Series H Preferred Stock was
convertible into the greater of a) $0.025 per share or b) 100% of the average of the three lowest closing bid prices for the ten
trading days immediately preceding the Company’s receipt of a notice of conversion.
Series
I Preferred Stock
Prior
to cancellation, the Series I Preferred Stock had a stated value of $10.00 per share. Each share of Series I Preferred Stock was
convertible into 500 shares of the Company’s common stock.
Series
J Preferred Stock
Prior
to cancellation, the Series J Preferred Stock had a stated value of $2,500 per share. Each share of the Series J Preferred Stock
was convertible into the Company’s common shares using a conversion price equal to 50% of the average closing price of the
Company’s common stock for the ten trading days immediately preceding the conversion date, although in no instance less
than $0.01 per share or greater than $0.03 per share.
Series
Y Preferred Stock
Prior
to cancellation, the Series Y Preferred Stock had a stated value and par value of $0.01 and had no liquidity preference. Each
share of Series Y Preferred Stock had 203 votes per share and had the right to vote with the common shareholders in all matters.
The shares were convertible into one share of the Company’s common stock at the holder’s option subject to an adjustment
upon issuing dividends or distributions payable in common stock and reverse or forward stock split. The shares were held by a
former Chairman of the Board of the Company.
NOTE
8: RELATED PARTY TRANSACTIONS
The
Company has entered into a consulting agreement with an entity owned by our Chairman of the Board and Chief Executive Officer.
During the three months ended September 30, 2016 and 2015 the Company had incurred consulting fees and related expense reimbursements
of $55,000 and $24,000, respectively.
On
August 15, 2016 the Company issued 20,000,000 shares of its common stock to its CEO, Kevin Yates, as compensation. The shares
were valued at $0.03 per share, the market price of the common stock on the date of issuance. See Note 7- Stockholders’
Deficit.
On
August 15, 2016 the Company issued 5,000,000 shares of its common stock to its newly appointed CFO, Mark Lucky, as compensation.
The shares were valued at $0.03 per share, the market price of the common stock on the date of issuance. See Note 7- Stockholders’
Deficit.
NUSTATE
ENERGY HOLDINGS, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2016
NOTE
9: SUBSEQUENT EVENTS
On
November 1, 2016, the Company signed a letter of intent to enter into an exclusive Partnering Agreement with The Lady Darling
Heritage Foundation of the Bahamas and Americas to address the immediate need for hurric
ane proof
housing in the Bahamas.
On
November 11, 2016, the Company signed a letter of intent to enter into an good-faith negotiations with Enviro Builders, LLC (“Enviro
Builders”) related to the Enviro Builders Smart Steel distribution agreement and their manufacturing operations Pursuant
to the letter of intent, Enviro Builders is prepared to offer NSEH, its agents or assigns, a commission payment in the amount
of $0.80 for each sq. ft. of panel presented for manufacturing. In addition, Enviro Builders is prepared to offer NSEH an international
distributorship agreement for the Bahamas and additional designated areas approved by Enviro Builders.
Management
reviewed all material events through the date on which these financial statements were issued, and has determined that there are
no material subsequent events to report, other than those included herein.