1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
Simlatus Corporation ("SIML" or "Company") was incorporated in the State of Nevada under the name Sunberta Resources Inc. on November 15, 2006, as a mining and exploration of mineral claims business. On November 18, 2009, the Company changed its name to Grid Petroleum Corp. and continued with the mining and exploration of mineral claims operations, exploring mining claims in Alberta, Canada, Vancouver Island, British Columbia, England and the United States.
On March 9, 2016, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with RJM and Associates, LLC, a California limited liability company ("RJM") whereby RJM's owners became the directors of the Company and were to be issued $6,250,000 worth of the Company's stock; $5,000,000 of Restricted Common Stock 90 days from the date of this agreement and $1,250,000 of Preferred Series-A Shares of the Company's Preferred Stock (the "Acquisition"). On the same date, the entire management of RJM became the entire management of the Company.
RJM was incorporated in the State of California on June 11, 2014 for the purpose of operating a broadcast equipment production business.
The Company's transaction with RJM has been treated as a reverse recapitalization of the Company, with the Company (the legal acquirer of RJM) considered the accounting acquiree, and RJM, whose management took control of the Company (the legal acquiree of the Company) considered the accounting acquirer. The Company did not recognize goodwill or any intangible assets in connection with the transaction. All costs related to the transaction are being charged to operations as incurred. The $6,250,000 worth of shares of Company stock, to be issued in conjunction with the transaction, was presented as a liability until such time that the shares were issued and the liability reduced. The historical financial statements include the operations of the accounting acquirer for all periods presented.
On March 25, 2016, the Company approved a name change to Simlatus Corporation, stock symbol SIML, which was executed on April 4, 2016. The new name change better describes the Company's new business and new revenues in selling commercial broadcast equipment on a global basis. Simlatus Corporation develops, manufactures, markets, and owns proprietary advanced broadcast equipment and software and sells this audio and video broadcast equipment worldwide. These systems have been sold worldwide over the past 15 years including some of the major broadcast companies.
The Company currently sells approximately 55 different audio/video products, and is preparing to market its newest audio/video product referred to as SyncPal™. In addition to the Company's traditional line of audio/video products, it has commenced the research & development of its Immersive Broadcast System, referred to as the Simlatus-IBS™. The Simlatus-IBS™ will include commercial augmented reality and virtual reality applications for studio engineers. These applications, both hardware and software, will allow the customer to control and manage the studio audio/video systems from anywhere in the world. These products are being developed to serve a market segment that is presently being strongly embraced by consumers and is forecasted, by some of the most widely recognized tech companies in the world, as becoming a multi-billion-dollar market in the very near future. The Market Analysis and IP Portfolio will include new patents specifically developed for these products and owned by the Company.
Cash and Cash Equivalents
Cash and equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. As of March 31, 2017 and 2016 the Company had no cash equivalents.
Revenue Recognition
The Company recognizes revenue on arrangements in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company's revenues to date consist of the sale of audio and video broadcasting products.
Accounts Receivable and Uncollectible Receivables
Accounts Receivable are recorded at the invoiced amount to the customer and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business, but mitigates associated risks by actively pursuing past due accounts. Receivables that are over 180 days past due are deemed uncollectible and are written off to the statement of operations. During the years ended March 31, 2017 and 2016 no receivables were written off as uncollectible.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the fiscal year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.
Use of Estimates
The preparation of the Company's financial statements in conformity with generally accepted accounting principles of United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Actual results could differ from those estimates.
Loss Per Share
Basic loss per share of common stock is computed by dividing the net loss by the weighted average number of common shares outstanding during the period after giving retroactive effect to the reverse stock split affected on July 22, 2016 (see Note 10). Diluted earnings (loss) per share is equal to the basic per share for the years ended March 31, 2017 and 2016. Common stock equivalents are not included in the loss per share since they are anti-dilutive. All per share amounts have been adjusted for the reverse stock split.
Inventories
Inventories are stated at the lower of cost, computed using the first-in, first-out method and net realizable value. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period. As of March 31, 2017 and 2016, the Company recorded an allowance for obsolete inventory of $125,329 and $125,886, respectively, and recorded $0 and $11,901, respectively, as a loss on obsolete inventory. As of March 31, 2017 and 2016, the Company's inventories consist only of raw materials and supplies rather than finished goods.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels and which is determined by the lowest level input that is significant to the fair value measurement in its entirety.
These levels are:
Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 - inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - inputs are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
Financial assets and liabilities measured at fair value on a recurring basis:
|
|
Input
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
|
|
Level
|
|
|
Fair Value
|
|
|
Fair Value
|
|
Derivative Liability
|
|
|
3
|
|
|
$
|
5,316,130
|
|
|
$
|
2,944,855
|
|
Total Financial Liabilities
|
|
|
|
|
|
$
|
5,316,130
|
|
|
$
|
2,944,855
|
|
In management's opinion, the fair value of convertible notes payable and advances payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments. As of March 31, 2017 and 2016, the balances reported for cash, accounts receivable, prepaid expenses, accounts payable, and accrued liabilities, approximate the fair value because of their short maturities.
Income Taxes
The Company records deferred taxes in accordance with FASB ASC No. 740,
Income Taxes.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is "more likely-than-not" that a deferred tax asset will not be realized.
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (ASC Topic 606). ASU 2014-09 creates a new topic in the ASC Topic 606 and establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics, and expands and improves disclosures about revenue. In addition, ASU 2014-09 adds a new Subtopic to the Codification, ASC 340-40, Other Assets and Deferred Costs: Contracts with Customers, to provide guidance on costs related to obtaining a contract with a customer and costs incurred in fulfilling a contract with a customer that are not in the scope of another ASC Topic. The guidance in ASU 2014-09 is effective for public entities for annual reporting periods beginning after December 15, 2016, including interim periods therein. Early application is not permitted. Management is in the process of assessing the impact of ASU 2014-09 on the Company's financial statements.
In February 2016, the FASB issued ASU 2016-02 (ASC Topic 842), Leases. The ASU amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of assessing the impact on its consolidated financial statements.
2. GOING CONCERN
These financial statements have been prepared on a going-concern basis which assumes the Company will be able to realize assets and discharge liabilities in the normal course of business for the foreseeable future.
The Company has experienced substantial losses since its inception, has limited business operations, and has total liabilities in excess of total assets, which raises substantial doubt about the Company's ability to continue as going concern. The ability of the Company to meet its commitments as they become payable is dependent on the ability of the Company to obtain necessary financing or achieving a profitable level of operations. There is no assurance the Company will be successful in achieving these goals.
The Company does not have sufficient cash to fund its desired research and development objectives for its augmented/virtual reality product development for the next 12 months. The Company has arranged financing and intends to utilize the cash received to fund the research and development project. This financing may be insufficient to fund expenditures or other cash requirements required to complete the product design for the augmented/virtual reality markets. There can be no assurance the Company will be successful in completing any new product development. The Company plans to seek additional financing if necessary in private or public equity offering(s) to secure future funding for operations. There can be no assurance the Company will be successful in raising additional funding. If the Company is not able to secure additional funding, the implementation of the Company's business plan will be impaired. There can be no assurance that such additional financing will be available to the Company on acceptable terms or at all.
These financial statements do not give effect to adjustments to the amounts and classification to assets and liabilities that would be necessary should the Company be unable to continue as a going concern.
3. REVERSE ACQUISITION
On March 9, 2016, the Company closed the Acquisition pursuant to the Asset Purchase Agreement with RJM whereby RJM's owners became the directors of the Company and were to be issued $6,250,000 worth of the Company's stock; $5,000,000 of Restricted Common Stock 90 days from the date of this agreement and $1,250,000 of Preferred Series-A Shares of the Company's Preferred Stock. On the same date, the entire management of RJM became the entire management of the Company.
As control transferred to the former owners of RJM and the operations of RJM became the operations of the Company, the transaction was accounted for as a reverse acquisition with a shell company, or a reverse recapitalization. As RJM is deemed to be the acquirer for accounting purposes, its assets and liabilities are included in the balance sheet for the continuing entity at their historical carrying values and these financial statements are presented as a continuation of RJM.
The SIML assets, liabilities and results of operations have been included in these financial statements from March 9, 2016, the date of the Acquisition, and the SIML assets acquired and SIML liabilities assumed as of the date of Acquisition were as follows:
Assets acquired
|
|
$
|
-
|
|
|
|
|
|
|
Liabilities assumed:
|
|
|
|
|
Accounts payable
|
|
|
(28,592
|
)
|
Accrued wages
|
|
|
(509,334
|
)
|
Accrued interest payable
|
|
|
(219,180
|
)
|
Convertible notes payable
|
|
|
(789,560
|
)
|
Derivative liabilities
|
|
|
(3,337,374
|
)
|
|
|
|
|
|
Net liabilities assumed
|
|
$
|
(4,884,040
|
)
|
The table below presents the pro forma revenue and net loss for the year ended March 31, 2016, assuming the asset acquisition had occurred on April 1, 2015, pursuant to ASC 805-10-50. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the asset acquisition occurred on this date nor does it purport to predict the results of operations for future periods.
|
|
Year Ended
March 31, 2016
|
|
|
|
(Unaudited)
|
|
Revenue
|
|
$
|
45,081
|
|
Cost of materials
|
|
|
(30,560
|
)
|
Operating expenses
|
|
|
(580,411
|
)
|
Other income (expenses)
|
|
|
(500,843
|
)
|
Net loss
|
|
$
|
(1,066,733
|
)
|
Amounts presented above include the elimination of $880,000 of operating expenses and $974,954 of other expenses that were associated with SIML's transactions with Direct Capital Group.
4. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The financial statements for the year ending March 31, 2016, filed with the SEC on June 29, 2016 in Form 10-K, contained errors and omissions related to the asset acquisition on March 9, 2016. The transaction should have been treated as a reverse acquisition and capital transaction in substance, rather than an asset acquisition. Therefore, the accounting acquirer, RJM & Associates, LLC, and its operation should have been accounted for and presented in the financial statements as of March 31, 2016.
Furthermore, it was determined that the Company's convertible debt instruments should have been captured at fair value on the acquisition date of March 9, 2016. In addition to the errors resulting from the incorrect accounting for the acquisition, the March 31, 2016 financial statements were also restated to correct errors in the accounting for (1) the cancellation or forgiveness of debt, (2) the conversions of debt into common stock, and (3) for derivative liability valuations. Accordingly, the balance sheets, statements of operations, statement of stockholders' deficit and statement of cash flows for the period ended March 31, 2016, have been restated to correct these errors and omission.
The restated financial statements correct the following errors to the Balance Sheet:
Cash Adjustments:
·
|
A bank account for RJM & Associates with a balance of $2,127 was not accounted for during the year ending March 31, 2016.
|
Accounts Receivable and Accounts Payable Adjustments:
·
|
Certain receivables in the amount of $1,695 and payables in the amount of $27,008 for RJM & Associates were not accounted for during the year ending March 31, 2016.
|
Inventory Adjustments:
·
|
The Company conducted a physical inventory and determined they did not have any finished goods on hand. During the audit, management agreed that while there was potential for the inventory value to be realized, it was not likely, considering the Company was not making efforts to find new customers to sell the old outdated technology to, and current customers were only interested in certain items (items sold in 2017). Accordingly, the Company determined to conservatively allow for the slow-moving items that had little to no movement during the years ended March 31, 2017 and 2016.
|
Oil and Gas Property and Acquired Intangible Asset Adjustments:
·
|
It was concluded that the exchange of the oil and gas asset for convertible debt was part of the Company's acquisition transaction with RJM & Associates. Therefore, the oil and gas lease and
Direct Capital convertible debt were not assets and liabilities that were exchanged in the acquisition, and those assets and liabilities were excluded from the Company's books as of March 9, 2016, as if the exchange occurred in conjunction with the acquisition transaction instead of 2 months after.
|
·
|
The intangible asset recorded as part of the Company's acquisition transaction with RJM & Associates was removed when the Company changed the accounting to record the recapitalization of the Company rather than record an asset acquisition.
|
Related Party Receivables and Payables Adjustments:
·
|
The due from related party receivable was deemed uncollectible and written off prior to the acquisition.
|
·
|
As stated above, the liabilities to the Company's related parties were part of the acquisition transaction, and therefore, those liabilities were removed from the Company's books as of March 9, 2016.
|
Accrued Wages and Shareholder Loans Adjustments:
·
|
A recalculation of James Powell's wages from his appointment to management and the Board of Directors to his resignation resulted in an overstatement of $11,625. No interest is being accrued, so the amount due will not change until he is paid or the amount is settled.
|
·
|
Accrued wages and interest for officers and employees from March 10, 2016 to March 31, 2016, were not previously accounted for as of March 31, 2016.
|
Notes Payable and Derivative Liability Adjustments:
·
|
As noted above, it was concluded that the exchange of the oil and gas asset for convertible debt was part of the Company's acquisition transaction with RJM & Associates. Therefore, the Direct Capital convertible notes were not liabilities that were exchanged in the business combination, and those liabilities were removed from the Company's books as of March 9, 2016, as if the exchange occurred in conjunction with the acquisition transaction instead of 2 months after. There were some Direct Capital notes left on the books as of March 9, 2016 due to the notes being transferred to other note holders or converted to equity after March 9, 2016.
|
·
|
Certain note holders thought to have cancelled or forgiven remaining balances were found to be incorrect, and therefore should not have been written off of the Company's books. The notes have been added back to the financial statements and the appropriate accrued interest and derivative liabilities accounted for as of March 31, 2016.
|
·
|
Due to the removal of Direct Capital note and the addition of notes deemed not to be cancelled, the Company overstated notes payable, net of discount of $1,576,326 and accrued interest of $179,940.
|
·
|
The Company performed a final mark-to-market adjustment for the derivative liability related to the convertible notes and concluded that the derivative liabilities were understated by $1,949,210.
|
Long Term Debt Adjustments:
·
|
Loans extended to RJM & Associates by Frank Trapp were not accounted for during the year ending March 31, 2016. As of March 31, 2016, the loan balance was $21,208.
|
Accumulated Other Comprehensive Loss and Deficit Accumulated During Development Stage Adjustments:
·
|
The Company concluded that the equity amounts were impacted by the acquisition transaction with RJM & Associates and therefore were adjusted as of March 9, 2016.
|
·
|
There were errors in the accounting for the conversions of debt into common stock, therefore adjustments were made to correct the errors, which affected the equity accounts.
|
The restated financial statements correct the following errors to the Statement of Operations:
Revenue and Cost of Materials Adjustments:
·
|
The Company understated income by $45,081 and cost of materials by $30,561, resulting in a gross profit of $14,520 for the year ended March 31, 2016. This was due to the Company omitting revenue and cost of sales generated by RJM & Associates.
|
Operating Expense Adjustments:
·
|
G&A expenses, management fees, and professional fees were overstated by $508,708, $110,000, and $349,273, respectively, and salaries and wages were understated by $450,185. This was a result of the Company presenting the operating expenses of SIML for a full year ending March 31, 2016 after accounting for the acquisition transaction as an asset acquisition. The Company should have accounted for the acquisition as a reverse recapitalization and presented the operating expenses of RJM & Associates for the full year ending March 31, 2016 plus the SIML operating expenses for the period from acquisition of March 9, 2016 through March 31, 2016. Therefore, adjustments were made to correct this error.
|
Other Income and Expense
Adjustments
:
·
|
The loss on derivative liability valuation was understated by $3,322,724, interest expense was overstated by $1,216,099, and debt forgiveness was understated by $4,319,053. These misstatements were due to the following: (1) the Company captured the amounts for SIML for a full year ending March 31, 2016, based on asset acquisition accounting, instead of capturing SIML transactions from the acquisition date of March 9, 2016 through March 31, 2016, based on the reverse recapitalization accounting, (2) the Company incorrectly recorded debt and its related interest and derivative amounts that were cancelled, forgiven, or exchanged, (3) the Company incorrectly recorded stock issued for debt transactions.
|
·
|
Loss on obsolete inventory was understated by $11,901 due to results of physical inventory conducted after the March 31, 2016 10-K filing date.
|
·
|
Interest income was understated by $86 due to RJM & Associates bank activity not included on financial statements.
|
·
|
Taxes paid was understated by $800 due to payment made by RMJ & Associates that was not accounted for on the previously reported financial statements.
|
The net effects of these corrections are noted below by line item for each financial statement that is impacted.
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
|
|
As Restated
|
|
Balance Sheet
|
|
March 31, 2016
|
|
|
Adjustments
|
|
|
March 31, 2016
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,226
|
|
|
$
|
2,127
|
|
|
$
|
4,353
|
|
Accounts receivable
|
|
|
-
|
|
|
|
1,695
|
|
|
|
1,695
|
|
Inventory, net
|
|
|
204,856
|
|
|
|
(144,918
|
)
|
|
|
59,938
|
|
Due from related party
|
|
|
16,653
|
|
|
|
(16,653
|
)
|
|
|
-
|
|
Oil & gas properties, net
|
|
|
7,026,666
|
|
|
|
(7,026,666
|
)
|
|
|
-
|
|
Deposit on intangible asset, net
|
|
|
5,972,311
|
|
|
|
(5,972,311
|
)
|
|
|
-
|
|
Total Assets
|
|
$
|
13,222,712
|
|
|
$
|
(13,156,726
|
)
|
|
$
|
65,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
22,215
|
|
|
$
|
27,008
|
|
|
$
|
49,223
|
|
Accrued wages
|
|
|
162,500
|
|
|
|
16,868
|
|
|
|
179,368
|
|
Derivative liabilities
|
|
|
995,645
|
|
|
|
1,949,210
|
|
|
|
2,944,855
|
|
Due to related party
|
|
|
72,807
|
|
|
|
(72,807
|
)
|
|
|
-
|
|
Convertible notes payable, net of discount
|
|
|
2,337,859
|
|
|
|
(1,576,326
|
)
|
|
|
761,533
|
|
Convertible notes payable, interest
|
|
|
373,728
|
|
|
|
(179,940
|
)
|
|
|
193,788
|
|
Notes payable
|
|
|
-
|
|
|
|
21,208
|
|
|
|
21,208
|
|
Related party liabilities
|
|
|
6,250,000
|
|
|
|
-
|
|
|
|
6,250,000
|
|
Total Liabilities
|
|
$
|
10,214,754
|
|
|
$
|
185,221
|
|
|
$
|
10,399,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, Series A
|
|
$
|
1,520
|
|
|
$
|
-
|
|
|
$
|
1,520
|
|
Preferred stock, Series B
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
Common stock
|
|
|
16
|
|
|
|
-
|
|
|
|
16
|
|
Additional paid in capital
|
|
|
19,248,293
|
|
|
|
(29,061,812
|
)
|
|
|
(9,813,519
|
)
|
Accumulated other comprehensive loss
|
|
|
4,144
|
|
|
|
(4,144
|
)
|
|
|
-
|
|
Accumulated deficit during the development stage
|
|
|
(123,849
|
)
|
|
|
123,849
|
|
|
|
-
|
|
Accumulated deficit
|
|
|
(16,122,167
|
)
|
|
|
15,600,160
|
|
|
|
(522,007
|
)
|
Total Stockholders' Equity
|
|
$
|
3,007,958
|
|
|
$
|
(13,341,947
|
)
|
|
$
|
(10,333,989
|
)
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
|
|
As Restated
|
|
Statement of Operations
|
|
March 31, 2016
|
|
|
Adjustments
|
|
|
March 31, 2016
|
|
Sales
|
|
$
|
-
|
|
|
$
|
45,081
|
|
|
$
|
45,081
|
|
Cost of materials
|
|
|
-
|
|
|
|
(30,561
|
)
|
|
|
(30,561
|
)
|
G&A expenses
|
|
|
(557,118
|
)
|
|
|
508,807
|
|
|
|
(48,311
|
)
|
Management fees
|
|
|
(110,000
|
)
|
|
|
110,000
|
|
|
|
-
|
|
Professional fees
|
|
|
(364,711
|
)
|
|
|
349,273
|
|
|
|
(15,438
|
)
|
Salaries and wages
|
|
|
-
|
|
|
|
(450,185
|
)
|
|
|
(450,185
|
)
|
Loss on derivative liability valuation
|
|
|
(94,605
|
)
|
|
|
(3,322,724
|
)
|
|
|
(3,417,329
|
)
|
Gain on settlement of debt
|
|
|
419,284
|
|
|
|
4,319,053
|
|
|
|
4,738,337
|
|
Interest expenses
|
|
|
(2,198,284
|
)
|
|
|
1,216,099
|
|
|
|
(982,185
|
)
|
Loss on obsolete inventory
|
|
|
-
|
|
|
|
(11,901
|
)
|
|
|
(11,901
|
)
|
Other income
|
|
|
-
|
|
|
|
86
|
|
|
|
86
|
|
Income tax expense
|
|
|
-
|
|
|
|
(800
|
)
|
|
|
(800
|
)
|
Net Loss
|
|
$
|
(2,905,434
|
)
|
|
$
|
2,732,227
|
|
|
$
|
(173,206
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share
|
|
$
|
(0.0074
|
)
|
|
|
|
|
|
$
|
(2.1277
|
)
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
|
|
As Restated
|
|
Statement of Cash Flows
|
|
March 31, 2016
|
|
|
Adjustments
|
|
|
March 31, 2016
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net profit (loss)
|
|
$
|
(2,905,434
|
)
|
|
$
|
2,732,228
|
|
|
$
|
(173,206
|
)
|
Amortization of convertible debt discount
|
|
|
233,633
|
|
|
|
156,367
|
|
|
|
390,000
|
|
Depreciation and amortization
|
|
|
72,833
|
|
|
|
(72,833
|
)
|
|
|
-
|
|
New derivatives recorded as loan fees
|
|
|
-
|
|
|
|
532,459
|
|
|
|
532,459
|
|
Loss on derivative liability valuation
|
|
|
152,269
|
|
|
|
3,265,060
|
|
|
|
3,417,329
|
|
Gain on settlement of debt
|
|
|
-
|
|
|
|
(4,738,337
|
)
|
|
|
(4,738,337
|
)
|
Loss on obsolete inventory
|
|
|
-
|
|
|
|
11,901
|
|
|
|
11,901
|
|
Accounts receivable
|
|
|
-
|
|
|
|
14,280
|
|
|
|
14,280
|
|
Inventory
|
|
|
(204,856
|
)
|
|
|
198,978
|
|
|
|
(5,878
|
)
|
Decrease in due from related party
|
|
|
195
|
|
|
|
(195
|
)
|
|
|
-
|
|
Accounts payable
|
|
|
16,993
|
|
|
|
2,918
|
|
|
|
19,911
|
|
Accrued liabilities
|
|
|
6,250,000
|
|
|
|
(6,254,162
|
)
|
|
|
(4,162
|
)
|
Accrued wages
|
|
|
-
|
|
|
|
498,198
|
|
|
|
498,198
|
|
Accrued interest
|
|
|
225,891
|
|
|
|
(216,875
|
)
|
|
|
9,016
|
|
Net cash provided (used) by operating activities
|
|
|
3,841,524
|
|
|
|
(3,870,013
|
)
|
|
|
(28,489
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposit on intangible asset
|
|
|
(6,045,144
|
)
|
|
|
6,045,144
|
|
|
|
-
|
|
Net cash provided (used) by investing activities
|
|
|
(6,045,144
|
)
|
|
|
6,045,144
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable
|
|
|
-
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Payments on notes payable
|
|
|
-
|
|
|
|
(8,400
|
)
|
|
|
(8,400
|
)
|
Proceeds from convertible notes payable
|
|
|
696,734
|
|
|
|
(696,734
|
)
|
|
|
-
|
|
Proceeds from (payments to) related parties, net
|
|
|
30,919
|
|
|
|
(39,940
|
)
|
|
|
(9,021
|
)
|
Bank overdraft
|
|
|
(39
|
)
|
|
|
39
|
|
|
|
-
|
|
Proceeds from stockholders' loans
|
|
|
(345,959
|
)
|
|
|
345,959
|
|
|
|
-
|
|
Issuance of preferred stock
|
|
|
201
|
|
|
|
(201
|
)
|
|
|
-
|
|
Issuance of common stock
|
|
|
1,823,990
|
|
|
|
(1,823,990
|
)
|
|
|
-
|
|
Net cash provided (used) by financing activities
|
|
|
2,205,846
|
|
|
|
(2,198,267
|
)
|
|
|
7,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
2,226
|
|
|
|
(23,136
|
)
|
|
|
(20,910
|
)
|
Cash, beginning of year
|
|
|
-
|
|
|
|
25,263
|
|
|
|
25,263
|
|
Cash, end of year
|
|
$
|
2,226
|
|
|
$
|
2,127
|
|
|
$
|
4,353
|
|
5. PREPAID EXPENSES
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Prepaid expenses
|
|
$
|
10,000
|
|
|
$
|
-
|
|
Prepaid fees represent amounts paid in advance for future contractual benefits to be received. Contracting expenses paid in advance are recorded as a prepaid asset and then amortized to the statements of operations when services are rendered, or over the life of the contract using the straight-line method.
As of March 31, 2017, the Company recorded prepaid expenses of $10,000 for legal fees billed in advance for April through August 2017, at $2,000 per month.
6. CONVERTIBLE NOTES PAYABLE
As of March 31, 2017, and March 31, 2016, notes payable were comprised of the following:
|
|
Original
|
Due
|
Interest
|
Conversion
|
March 31,
|
March 31,
|
|
|
Note Date
|
Date
|
Rate
|
Rate
|
2017
|
2016
|
|
|
|
|
|
|
|
(Restated)
|
Anthony Super
|
3/24/16
|
4/1/14
|
12%
|
Variable
|
$ -
|
$ 23,020
|
ARC Capital Ltd
|
10/1/15
|
4/2/15
|
24%
|
Variable
|
11,625
|
21,625
|
Asher Enterprises #4
|
9/16/11
|
6/20/12
|
22%
|
Variable
|
13,000
|
13,000
|
Auctus Fund
|
12/16/16
|
9/16/17
|
10%
|
Variable
|
46,750
|
-
|
Blackbridge Capital #1
|
9/30/15
|
2/28/16
|
5%
|
Variable
|
-
|
2,000
|
Blackbridge Capital #2
|
5/3/16
|
5/3/17
|
5%
|
Variable
|
80,400
|
-
|
Coventry Enterprises #2
|
3/3/14
|
3/3/15
|
24%
|
Variable
|
-
|
2,114
|
Direct Capital #1
|
12/31/12
|
Demand
|
0%
|
Variable
|
-
|
23,550
|
Direct Capital #2
|
10/1/13
|
4/1/14
|
12%
|
Variable
|
-
|
87,150
|
Direct Capital #7
|
9/30/15
|
3/31/16
|
22%
|
Variable
|
-
|
100,000
|
Direct Capital #26
|
4/7/16
|
10/7/16
|
8%
|
Variable
|
25,000
|
-
|
Direct Capital #27
|
5/17/16
|
11/17/16
|
8%
|
Variable
|
36,000
|
-
|
EMA Financial
|
11/9/16
|
11/9/17
|
10%
|
Variable
|
35,000
|
-
|
GHS Investment #1
|
10/23/15
|
7/25/16
|
22%
|
Variable
|
-
|
12,748
|
GHS Investment #3
|
2/7/17
|
Demand
|
0%
|
Variable
|
98,800
|
-
|
GW Holdings
|
10/13/15
|
4/1/15
|
24%
|
Variable
|
42,500
|
46,500
|
LG Capital Funding
|
3/3/14
|
3/3/15
|
24%
|
Variable
|
-
|
29,000
|
Microcap Equity
|
10/15/15
|
7/30/15
|
8%
|
Variable
|
-
|
4,180
|
Rockwell Capital #5
|
2/28/17
|
Demand
|
0%
|
Variable
|
19,782
|
-
|
Southridge Partners
|
10/27/15
|
3/1/14
|
22%
|
Variable
|
15,655
|
15,655
|
Special Situations
|
3/12/12
|
9/12/12
|
8%
|
Variable
|
-
|
21,491
|
Syndication Capital #1
|
12/31/12
|
10/10/11
|
22%
|
0.01
|
5,000
|
5,000
|
Tide Pool
|
1/1/15
|
7/1/15
|
22%
|
Variable
|
348,500
|
354,500
|
Tri-Bridge Ventures #1
|
1/19/17
|
10/19/17
|
8%
|
Variable
|
25,000
|
-
|
Tri-Bridge Ventures #2
|
1/19/17
|
10/19/17
|
8%
|
Variable
|
150,000
|
-
|
V2IP #2
|
5/13/16
|
Demand
|
6%
|
Variable
|
10,000
|
-
|
Carl Ambrose
|
3/23/17
|
9/1/18
|
3%
|
Variable
|
20,914
|
-
|
Frank Trapp
|
3/23/17
|
12/31/17
|
5%
|
Variable
|
14,945
|
-
|
|
|
|
|
|
|
998,870
|
761,533
|
|
Debt discount
|
|
|
|
|
(222,094)
|
-
|
|
Notes payable, net of discount
|
|
|
|
$ 776,777
|
$ 761,533
|
During the year ending March 31, 2017, the Company received proceeds from new convertible notes of $146,000, reclassified promissory notes of $35,859 into convertible notes payable, reclassified accounts payable of $127,534 into convertible notes payable, and reclassified $198,640 of accrued interest into convertible notes payable. The Company recorded loan fees on new convertible notes of $166,750, which increased the debt discounts recorded on the convertible notes during the year ending March 31, 2017. The Company recorded no payments on their convertible notes, conversions of $410,444 of convertible note principal, a total gain on settlement of $27,001 representing the write-off of convertible note principal, and $19,063 of debt discount write-offs for early debt conversion or extinguishment. Each of the Company's convertible notes have a conversion rate that is variable or a conversion rate with a reset provision. Therefore, the Company has accounted for such conversion features as derivative instruments (see Note 7). As a result of recording derivative liabilities at note inception, the Company increased the debt discount recorded on their convertible notes by $593,485 during the year ending March 31, 2017. The Company also recorded amortization of $519,078 on their convertible note debt discounts.
As of March 31, 2017, the convertible notes payable are convertible into 15,018,976,166 shares of the Company's common stock.
During the year ended March 31, 2016, the Company received proceeds from new convertible notes of $0 and reclassified $30,000 of accrued interest into convertible notes payable. The Company recorded no payments on their convertible notes, conversions of $28,027 of convertible note principal, and a total gain on settlement of $30,000 representing the write-off of convertible note principal. Each of the Company's convertible notes have a conversion rate that is variable or a conversion rate with a reset provision. Therefore, the Company has accounted for such conversion features as derivative instruments (see Note 7). As a result of recording derivative liabilities at note inception, the Company increased the debt discount recorded on their convertible notes by $390,000 during the period ended March 31, 2016. The Company also recorded amortization of $390,000 on their convertible note debt discounts.
During the year ended March 31, 2017 and 2016, the Company recorded interest expense of $1,238,110 and $8,627, respectively, on its convertible notes payable. As of March 31, 2017 and 2016, the accrued interest on convertible notes payable was $1,215,519 and $193,788, respectively.
7. DERIVATIVE LIABILITIES
The following table represents the Company's derivative liability activity for the embedded conversion features for the years ended March 31, 2017 and 2016 respectively:
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
(Restated)
|
|
Balance, beginning of period
|
|
$
|
2,944,855
|
|
|
$
|
-
|
|
Recognition of derivative liability at asset acquisition
|
|
|
-
|
|
|
|
3,337,374
|
|
Initial recognition of derivative liability
|
|
|
1,282,329
|
|
|
|
922,458
|
|
Conversion of derivative instruments to Common Stock
|
|
|
(1,044,930
|
)
|
|
|
(59,106
|
)
|
Loss on derivative liability valuation
|
|
|
3,952,365
|
|
|
|
3,417,329
|
|
Gain on settlement of debt
|
|
|
(1,818,489
|
)
|
|
|
(4,673,200
|
)
|
Balance, end of period
|
|
$
|
5,316,130
|
|
|
$
|
2,944,855
|
|
Regarding the reverse recapitalization, on March 9, 2016 the Company recorded derivative liabilities of $3,337,374 to capture the fair value of their convertible notes with embedded conversion features.
During the years ended March 31, 2017 and 2016, the Company recorded derivative liabilities for embedded conversion features related to convertible notes payable of $1,282,329 and $922,458, respectively.
During the years ended March 31, 2017 and 2016, in conjunction with convertible notes payable principal and accrued interest being converted into common stock of the Company, derivative liabilities were reduced by $1,044,930 and $59,106, respectively.
For the years ended March 31, 2017 and 2016, the Company performed a final mark-to-market adjustment for the derivative liability related to the convertible notes and the carrying amount of the derivative liability related to the conversion feature and recognized a loss on the derivative liability valuation of $3,952,365 and $3,417,329, respectively.
During the years ended March 31, 2017 and 2016, the Company recognized gains of $1,818,489 and $4,673,200, respectively, due to the settlement of debt, on the change in fair value (mark-to market adjustment) of the derivative liability associated with the embedded conversion features in the accompanying statement of operations.
The Company uses the Black-Scholes option pricing model to estimate fair value for those instruments convertible into common shares at inception, at conversion or extinguishment date, and at each reporting date. During the year ended March 31, 2016 the company used the following assumptions in their Black-Scholes model: (1) risk free interest rate 0.21% - 0.52%, (2) term of 0.32 years - 0.5 years, (3) expected stock volatility of 288% - 1132%, (4) expected dividend rate of 0%, (5) common stock price of $0.10, and (6) exercise price of $0.01 - $0.07. During the year ended March 31, 2017 the company used the following assumptions in their Black-Scholes model: (1) risk free interest rate 0.23% - 0.99%, (2) term of 0.12 years - 1.44 years, (3) expected stock volatility of 184.75% - 1374.41%, (4) expected dividend rate of 0%, (5) common stock price of $0.003 - $0.30, and (6) exercise price of $0.0001 - $0.0816.
These instruments were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The instruments do not qualify for hedge accounting, and as such, all future changes in the fair value will be recognized in earnings until such time as the instruments are exercised, converted or expire.
8. RELATED PARTY TRANSACTIONS
In conjunction with the reverse recapitalization transaction on March 9, 2016 (see Note 3), the Company recorded amounts due to related parties of $6,250,00, which represented shares that were owed to members of management. During the year ended March 31, 2017 the Company issued 698,324 Series A Preferred shares and 398,863,636 common shares to reduce the liability by $3,458,750, resulting in a remaining liability of $2,791,250 as of March 31, 2017.
The Company is periodically advanced noninterest bearing operating funds from related parties. The advances are due on demand and unsecured. As of March 31, 2017 and 2016 the Company owed related parties $50,262 and $0, respectively.
9. PREFERRED STOCK
On January 25, 2011, the Company filed an amendment to its Nevada Certificate of Designation to create two classes of Preferred Stock, Series A and Series B, with a par value of $0.001. Each class has 10,000,000 shares authorized.
On July 1, 2015, the Company's Board of Directors authorized the creation of shares of Series B Voting Preferred Stock and on July 27, 2015 a Certificate of Designation was filed with the Nevada Secretary of State. The holder of the shares of the Series B Voting Preferred Stock has the right to vote those shares of the Series B Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series B Voting Preferred Stock is equal to and counted as 4 times the votes of all of the shares of the Company's (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company regarding each and every matter submitted to the shareholders of the Company for approval.
On January 3, 2017, the Company filed an Amendment to Certificate of Designation with the Nevada Secretary of State defining the rights and preferences of the Series A Preferred Shares. Series A Preferred Stock shall be convertible into common shares at the rate of the closing market price on the day of the conversion notice equal to the dollar amount of the value of the Series A Share, and holders shall have no voting rights on corporate matters, unless and until they convert their Series A Shares into Common Shares, at which time they will have the same voting rights as all Common Shareholders have; their consent shall not be required for taking any corporate action.
As a result of the reverse recapitalization transaction on March 9, 2016 (see Note 3), the Company recorded the issuance of 1,319,500 shares of Series A Preferred Stock and 1,000 shares of Series B Voting Preferred Stock.
On March 21, 2016 a former SIML director and member of SIML management agreed to convert all of his outstanding salary and unpaid expenses to Preferred Series A Stock. The Company issued 200,000 shares of Preferred Series A stock to satisfy $358,459 of debt. The stock is locked-up for 24 months from the date of issuance.
On August 3, 2016, pursuant to the Asset Purchase Agreement dated March 9, 2016, the Company issued 698,324 shares of Preferred Series A stock in equal amounts of 174,581 shares each to Robert Stillwaugh, Mike Schatz, Gary Tilden and Donna Marie Murtaugh, at a price of $1.79 per share.
On March 20, 2017, 4,670 shares of Series A preferred shares were converted to 41,800,000 common shares.
As of March 31, 2017, 10,000,000 Series A preferred shares and 10,000,000 Series B preferred shares were authorized, of which 2,213,154 Series A shares were issued and outstanding, (1,519,500 shares as of March 31, 2016) and 1,000 Series B shares were issued and outstanding (1,000 shares as of March 31, 2016).
10. COMMON STOCK
On June 15, 2016, the Company approved the authorization of a 1 for 1,000 reverse stock split of the Company's outstanding shares of common stock, which was effective on July 22, 2016. The financial statements have been retroactively adjusted to take this into account for all periods presented.
On August 29, 2016, the Company filed a Certificate of Amendment to reduce the amount of authorized common shares to 163,000,000 shares, par value of $0.00001.
On November 14, 2016, the Company filed a Certificate of Amendment to increase the number of authorized common shares to 1,500,000,000 with a par value of $0.00001.
On December 8, 2016, the Company filed a Certificate of Amendment to increase the number of authorized common shares to 3,000,000,000 with a par value of $0.00001.
On January 26, 2017, the Company filed a Certificate of Amendment with the State of Nevada in order to increase the number of authorized shares of Common Stock. The number of authorized common stock the Company shall have the authority to issue is 7,000,000,000; par value $0.00001 per share.
As a result of the reverse recapitalization transaction on March 9, 2016 (see Note 3), the Company recorded the issuance of 1,024,496 shares of common stock.
From March 9, 2016 through March 31, 2016, the holders of convertible notes converted a total of $30,310 of principal and interest into 591,200 shares of common stock. The common stock was valued at $59,120 based on the market price of the Company's stock on the date of conversion. The issuance extinguished $59,106 worth of derivative liabilities and $30,296 was recorded as a gain on settlement of debt.
On August 3, 2016, pursuant to the Asset Purchase Agreement dated March 9, 2016, the Company issued 136,363,636 shares of common stock in equal amounts of 34,090,909 shares each to Robert Stillwaugh, Mike Schatz, Gary Tilden and Donna Marie Murtaugh, at a price of $0.011 per share, which resulted in a reduction of $1,500,000 to related party liabilities. The shares were valued at $2,045,455 based on the market price of the Company's common stock on the date of issuance and $545,455 was recorded as a loss on settlement of debt.
On November 16, 2016, pursuant to the Asset Purchase Agreement dated March 9, 2016, the Company issued 350,000,000 shares of common stock in equal amounts of 87,500,000 shares each to Robert Stillwaugh, Mike Schatz, Gary Tilden and Donna Marie Murtaugh, at a price of $0.027 per share. On December 5, 2016, Donna Murtaugh entered into a Cancellation of Issued Shares Agreement with the Company, whereby she has agreed to the cancellation of those 87,500,000 Shares and to defer payment to her under the Asset Purchase Agreement and the Amended Asset Purchase Agreement. The stock issued and not cancelled were valued at $918,750 based on the market price of the Company's common stock on the date of issuance and resulted in a reduction of related party liabilities of $708,750 and a loss on settlement of debt of $210,000.
During the year ended March 31, 2017, the holders of convertible notes converted a total of $414,883 of principal and interest into 588,708,957 shares of common stock. The common stock was valued at $1,241,752 based on the market price of the Company's stock on the date of conversion. The issuance extinguished $1,044,930 worth of derivative liabilities, $19,063 of debt discount, and $198,998 was recorded as a gain on settlement of debt.
During the year ended March 31, 2017 the Company issued 68,600,000 shares of common stock for services valued at $51,720, based on the market price of the Company's common stock on the date of issuance.
On March 20, 2017, 41,800,000 common shares were issued in exchange for 4,670 shares of Series A preferred shares.
As of March 31, 2017, 7,000,000,000 common shares, par value $0.00001, were authorized, of which 1,099,588,289 shares were issued and outstanding (1,615,696 shares as of March 31, 2016).
11. INCOME TAXES
Deferred taxes are provided on a liability method, whereby deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax liabilities consist of the following components as of March 31 ,2017 and 2016:
|
|
2017
|
|
|
2016
|
|
Deferred tax assets:
|
|
|
|
|
|
|
NOL Carryover
|
|
$
|
712,800
|
|
|
$
|
4,700
|
|
Inventory Allowance
|
|
|
48,900
|
|
|
|
49,100
|
|
Accrued Payroll
|
|
|
256,000
|
|
|
|
70,000
|
|
Deferred tax liabilities
|
|
|
-
|
|
|
|
-
|
|
Valuation allowance
|
|
|
(1,017,700
|
)
|
|
|
(203,800
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The income tax provision differs from the amount of income tax determined by applying the US federal income tax rate to pretax income from continuing operations for the years ended March 31, 2017 and 2016 due to the following:
|
|
2017
|
|
|
2016
|
|
Book Income
|
|
$
|
(2,333,700
|
)
|
|
$
|
(4,338,000
|
)
|
Interest Expense (for derivative)
|
|
|
485,700
|
|
|
|
569,800
|
|
Gain/Loss on Derivative
|
|
|
1,541,400
|
|
|
|
2,346,800
|
|
Gain/Loss on Settlement of Debt
|
|
|
(507,900
|
)
|
|
|
95,800
|
|
Inventory Allowance
|
|
|
(200
|
)
|
|
|
4,800
|
|
Accrued Payroll
|
|
|
186,000
|
|
|
|
(127,000
|
)
|
Meals & Entertainment
|
|
|
600
|
|
|
|
-
|
|
Valuation allowance
|
|
|
628,100
|
|
|
|
1,447,800
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
At March 31, 2017, the Company had net operating loss carryforwards of approximately $1,828,000 that may be offset against future taxable income from the year 2018 through 2037. No tax benefit has been reported in the March 31, 2017 financial statements since the potential benefit is offset by a valuation of allowance of the same amount.
Due to the change in ownership provision of the Tax Reform Act of 1986, net operating loss carryforwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.
As of the date of this filing, the Company is delinquent in filing their tax returns, and there is uncertainty regarding potential penalties and interest. The last return filed by the Company was March 31, 2012, and the Company has not accrued for any potential penalties or interest from that period forward. The Company will need to file returns for the years ending March 31, 2013, 2014, 2015 and 2016, which are still open for examination.
12. COMMITMENTS AND CONTINGENCIES
On June 27, 2016, the Company entered into a Consulting Agreement with Channel Sales & Consulting, LLC ("Channel"). The Company has agreed to pay Channel $3,000 per month for the first two months, and $4,000 per month thereafter. Channel will also be paid a 10% commission on all gross sales generated through a licensed dealer and 30% commission on non-licensed dealers. If within the first twelve months of the Agreement, Channel generates gross sales above $2,000,000, the Company will pay an additional 5% commission on gross sales, either in cash or restricted common stock.
On February 1, 2017, the Company entered into a standard office lease for approximately 1,700 square feet of office space at 175 Joerschke Drive, Suite A, Grass Valley, CA 95945. The lease has a term of 1 year, from February 1, 2017 through January 31, 2018 with a monthly rent of $1,400. The Company intends to renew this lease. Rental expenses incurred for this operating lease during the years ended March 31, 2017 and 2016 were $29,800 and $12,800, respectively.
On March 6, 2017, the Company entered into a Consulting Agreement with TEN Associates LLC. The Company has agreed to pay TEN Associates LLC $3,000 per month for a period of six (6) months
.
On March 27, 2017, the Company entered into an Investor Relations Consulting Agreement with StockVest that covered the period from April 1, 2017 through July 1, 2017. The Company issued 200,000,000 shares of restricted common stock as compensation pursuant to the Agreement. The parties to the arrangement agreed that the shares originally issued were not sufficient therefore on April 27, 2017 the Company amended their arrangement with StockVest and issued an additional 80,000,000 shares of restricted common stock and extended the contract term through August 1, 2017 (see Note 14).
13. SUPPLEMENTAL CASH FLOW INFORMATION
During the year ending March 31, 2017, the Company had the following non-cash investing and financing activities:
-
|
Issued stock for debt increasing common stock by $9,876, increasing preferred stock by $698, increasing additional paid in capital by $4,888,927, reducing notes payable by $391,381, reducing accrued interest by $4,440, reducing related party liabilities by $3,458,750, and reducing derivative liability by $1,044,930.
|
-
|
Increased debt discount and increased derivative liability by $539,485 to record derivative liabilities at the inception of new notes
|
-
|
Increased common stock by $418 and decreased preferred stock and additional paid in capital by $5 and $413, respectively, to record preferred stock converted to common stock.
|
-
|
Reclassified $198,640 of accrued interest to convertible notes payable.
|
-
|
Reclassified $3 5,859 of notes payable to convertible notes payable.
|
-
|
Reclassified $127,534 of accounts payable to convertible notes payable.
|
During the year ending March 31, 2016, the Company had the following non-cash investing and financing activities:
-
|
Issued stock for debt increasing common stock by $6, increasing preferred stock by $200, increasing additional paid in capital by $447,669, reducing notes payable by $28,027, reducing accrued interest by $2,283, reducing accrued payroll by $358,459, and reducing derivative liability by $59,106.
|
-
|
Increased debt discount and increased derivative liability by $390,000 to record derivative liabilities at the inception of new notes.
|
-
|
Reclassified $30,000 of accrued interest to convertible notes payable.
|
-
|
Increased members contribution by $904,478, reduced accrued payroll by $727,779, reduced related party liabilities by $172,568, and reduced related party interest by $4,131 as a result of members forgiving amounts owed to them.
|
-
|
As a result of the Company's acquisition transaction with RJM increased AP by $28,592, increased accrued payroll by $509,334, increased accrued interest by $219,180, increased convertible notes payable by $789,560, increased derivative liability by $3,337,374, increased related party liabilities by $6,250,000, decreased members contribution by $904,478, increased common stock by $10, increased preferred stock by $1,321, and decreased additional paid in capital by $10,229,572.
|
14. SUBSEQUENT EVENTS
On April 1, 2017, the Company entered into a Consulting Agreement with Hanson & Associates. The Company has agreed to pay Hanson & Associates a retainer of $15,000 for services performed for a period of three (3) months, and a fee of $5,000 per month thereafter. In addition, the Company shall issue $25,000 in SIML common shares. The stock is to be issued upon signing of the agreement and will be restricted for six (6) months, however, as of the date of this filing the shares have not yet been issued.
On April 7, 2017, the Company entered into a Consulting Agreement with Greg Rogers. The Company has agreed to pay Mr. Rogers a retainer of $10,500 and a monthly fee of $3,500. In addition, the Company shall issue $25,000 in SIML common shares, which, as of the date of this filing, have not yet been issued. The stock is to be issued upon signing of the agreement and will be restricted for six (6) months. As of the date of this filing, the Company has terminated the Consulting Agreement, and has agreed to issue $25,000 in shares as stipulated in the Agreement.
On April 27, 2017, the Company extended their Investor Relations Consulting Agreement with StockVest through August 1, 2017 and issued them an additional 80,000,000 shares of restricted common stock as compensation pursuant to the Agreement.
On April 20, 2017, the Company entered in a Convertible Promissory Note with Tri-Bridge Ventures LLC in the amount of $35,817 which was pursuant to an Assignment and Assumption Agreement, where Tri-Bridge Ventures, LLC purchased the debts of $20,000 owed to Carl Abrose and $15,817 owed to Frank Trapp. The note is unsecured, bears interest at 8% per annum, and matures on April 20, 2018.
On April 21, 2017, the Company entered in a Convertible Promissory Note with Tri-Bridge Ventures LLC in the amount of $20,000. The note is unsecured, bears interest at 8% per annum, and matures on January 21, 2018.
On May 24, 2017, Mr. Gary Tilden tendered his resignation as President, Chief Executive Officer and Secretary of the Company, effective June 1, 2017. The resignation did not involve any disagreement with the Company on any matter relating to the Company's operations, policies or practices. Mr. Tilden will continue assisting the Company pursuant to a Consulting Agreement effective June 1, 2017. Further, the Company issued Mr. Tilden 536,351 Preferred Series A Shares in exchange of accrued salary and expenses of $960,069. Additionally, Mr. Tilden returned 250 Series B Voting Preferred shares to the Company for cancellation, in addition to 121,590,909 common shares and the Company issued Mr. Tilden 747,208 Series A Preferred shares.
On May 24, 2017, Mr. Robert Stillwaugh was appointed the position of President, and Chief Executive Officer of the Company, effective June 1, 2017. Mr. Stillwaugh will be compensated under his Employment Agreement entered into on April 1, 2016, and will receive no additional compensation pursuant to his appointment.
On May 24, 2017, Mr. Mike Schatz was appointed the position as Secretary of the Company, effective June 1, 2017. Mr. Schatz will be compensated under his Employment Agreement entered into on April 1, 2016 and will receive no additional compensation pursuant to his appointment.
On June 1, 2017, the Company entered into a Consulting Agreement with former President Gary Tilden. The term of this agreement is for a period of one year and is renewable with mutual consent. The Company has agreed to compensate Mr. Tilden $2,500 per month and any unpaid fees will accrue interest at 6% per year.
Subsequent to March 31, 2017 the Company issued 3,013,670,147 shares of common stock in exchange for the conversion of convertible notes payable and accrued interest. The Company also exchanged 12,788 Preferred Series A shares for 191,832,324 Common Stock shares.
The Company has evaluated subsequent events pursuant to ASC Topic 855 and has determined that there are no additional subsequent events to disclose.