|
Item 1.
|
Financial Statements
|
UPD HOLDING
CORP. AND
SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,453
|
|
|
$
|
20,718
|
|
Other current assets
|
|
|
755
|
|
|
|
755
|
|
Total assets
|
|
$
|
4,208
|
|
|
$
|
21,473
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
203,023
|
|
|
$
|
171,547
|
|
Accrued interest
|
|
|
82,993
|
|
|
|
77,134
|
|
Convertible notes payable
|
|
|
179,484
|
|
|
|
180,129
|
|
Due to shareholders
|
|
|
72,225
|
|
|
|
72,225
|
|
Notes payable
|
|
|
104,560
|
|
|
|
104,560
|
|
Total current liabilities
|
|
|
642,285
|
|
|
|
605,595
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value; 10,000,000 authorized and none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.005 par value; 200,000,000 shares authorized and 172,450,907 issued and outstanding
|
|
|
862,255
|
|
|
|
862,255
|
|
Additional paid-in-capital
|
|
|
1,872,632
|
|
|
|
1,872,632
|
|
Accumulated deficit
|
|
|
(3,372,964
|
)
|
|
|
(3,319,009
|
)
|
Total stockholders' deficit
|
|
|
(638,077
|
)
|
|
|
(584,122
|
)
|
Total liabilities and stockholders' deficit
|
|
$
|
4,208
|
|
|
$
|
21,473
|
|
The accompanying notes are an integral part
of the unaudited consolidated financial statements.
UPD HOLDING
CORP. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the Three Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Revenues:
|
|
|
|
|
|
|
Product sales
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
45,616
|
|
|
|
24,424
|
|
General and administrative
|
|
|
2,480
|
|
|
|
2,096
|
|
Total operating costs and expenses
|
|
|
48,096
|
|
|
|
26,520
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(48,096
|
)
|
|
|
(26,520
|
)
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(5,859
|
)
|
|
|
(17,162
|
)
|
Other income, net
|
|
|
—
|
|
|
|
23,439
|
|
Loss from continuing operations, before income taxes
|
|
|
(53,955
|
)
|
|
|
(20,243
|
)
|
Provision for income taxes
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
|
(53,955
|
)
|
|
|
(20,243
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share from:
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
172,450,907
|
|
|
|
169,284,024
|
|
The accompanying notes are an
integral part of the unaudited consolidated financial statements.
UPD HOLDING
CORP. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE PERIODS ENDED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity (Deficit)
|
|
BALANCE, June 30, 2020
|
|
|
—
|
|
|
$
|
—
|
|
|
|
172,450,907
|
|
|
$
|
862,255
|
|
|
$
|
1,872,632
|
|
|
$
|
(3,319,009
|
)
|
|
$
|
(584,122
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(53,955
|
)
|
|
|
(53,955
|
)
|
BALANCE, September 30, 2020
|
|
|
—
|
|
|
$
|
—
|
|
|
|
172,450,907
|
|
|
$
|
862,255
|
|
|
$
|
1,872,632
|
|
|
$
|
(3,372,964
|
)
|
|
$
|
(638,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, June 30, 2019
|
|
|
—
|
|
|
$
|
—
|
|
|
|
171,008,684
|
|
|
$
|
855,044
|
|
|
$
|
1,709,731
|
|
|
$
|
(3,449,946
|
)
|
|
$
|
(885,171
|
)
|
Issuance of common stock for conversion of debt and interest
|
|
|
—
|
|
|
|
—
|
|
|
|
113,833
|
|
|
|
569
|
|
|
|
10,814
|
|
|
|
—
|
|
|
|
11,383
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(20,243
|
)
|
|
|
(20,243
|
)
|
BALANCE, September 30, 2019
|
|
|
—
|
|
|
$
|
—
|
|
|
|
171,122,517
|
|
|
$
|
855,613
|
|
|
$
|
1,720,545
|
|
|
$
|
(3,470,189
|
)
|
|
$
|
(894,031
|
)
|
The accompanying notes are an
integral part of the unaudited consolidated financial statements.
UPD HOLDING
CORP. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
|
|
For the Three Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(53,955
|
)
|
|
$
|
(20,243
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Gain on settlement of debt
|
|
|
—
|
|
|
|
(23,439
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
—
|
|
|
|
(755
|
)
|
Accrued interest
|
|
|
5,859
|
|
|
|
19,163
|
|
Accounts payable
|
|
|
30,831
|
|
|
|
(20,954
|
)
|
Net cash used in operating activities
|
|
|
(17,265
|
)
|
|
|
(46,228
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible notes payable
|
|
|
—
|
|
|
|
55,561
|
|
Principal payments on notes payable
|
|
|
—
|
|
|
|
(6,561
|
)
|
Net cash provided by financing activities
|
|
|
—
|
|
|
|
49,000
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(17,265
|
)
|
|
|
2,772
|
|
Cash and cash equivalents at beginning of period
|
|
|
20,718
|
|
|
|
7,215
|
|
Cash and cash equivalents at end of period
|
|
$
|
3,453
|
|
|
$
|
9,987
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash paid for interest
|
|
$
|
—
|
|
|
$
|
4,000
|
|
|
|
|
|
|
|
|
|
|
Non-Cash Supplemental Disclosures
|
|
|
|
|
|
|
|
|
Common stock issued for debt settlement
|
|
$
|
—
|
|
|
$
|
10,000
|
|
The accompanying notes are an
integral part of the unaudited consolidated financial statements.
UPD HOLDING
CORP. AND
SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 – BUSINESS AND ORGANIZATION
UPD Holding Corp. (“UPD”,
“Company”), incorporated in the State of Nevada, is a holding Company seeking to acquire assets and businesses to provide
a competitive advantage through cost-sharing and other synergies. The Company currently operates in the food and beverage industry
through Record Street Brewing (“RSB”) and weight and health management with its distribution and marketing agreement
with iMetabolic (“IMET”). The Company is pursuing business development opportunities in the food and beverage industry
and other product licensing agreements.
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Unaudited Interim Financial Statements
The accompanying unaudited interim consolidated
financial statements of the Company and its subsidiaries have been prepared in accordance with generally accepted accounting principles
(“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission and are unaudited. Accordingly,
they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the results for the interim
periods presented have been made. The results for the three month period ended September 30, 2020, may not be indicative of the
results for the entire year. These financial statements should be read in conjunction with the Company’s Annual Report on
Form 10-K for the fiscal year ended June 30, 2020 filed with the Securities and Exchange Commission on August 14, 2020.
The preparation of the Company’s
unaudited interim consolidated 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 reported amounts of expenses during
the reporting periods. Management makes these estimates using the best information available at the time the estimates are made;
however, actual results could differ materially from these estimates.
Principles of Consolidation
The Company consolidates the
assets, liabilities, and operating results of its wholly owned and majority-owned subsidiaries; Net Edge Devices, LLC, an Arizona
Limited Liability Company, iMetabolic Corp, (“IMET”) a Nevada corporation, and Record Street Brewing Co. a Nevada corporation.
All intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents consist
of cash and highly liquid investments with original maturities of 90 days of less at the date of purchase. The Company is exposed
to credit risk in the event of default by the financial institutions or the issuers of these investments to the extent the amounts
on deposit or invested are in excess of amounts that are insured. As of September 30, 2020 and June 30, 2020 the Company did not
have any cash equivalents or cash deposits in excess of the federally insured limits.
Use of Estimates
The preparation
of the Company’s consolidated 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 reported amounts of expenses
during the reporting periods. Management makes these estimates using the best information available at the time the estimates are
made; however, actual results could differ materially from these estimates.
Revenue Recognition
The Company
licenses its beer and beverage products to its customers. The royalties earned from these licensing agreements represent revenue
earned under contracts in which the Company bills and collects from its licensee in arrears. The Company determines the measurement
of revenue and the timing of revenue recognition utilizing the following core principles:
|
1.
|
Identifying the contract with a customer;
|
|
2.
|
Identifying the performance obligations in the contract;
|
|
3.
|
Determining the transaction price;
|
|
4.
|
Allocate the transaction price to the performance obligations in the contract; and
|
|
5.
|
Recognize revenue when (or as) the Company satisfies its performance obligations.
|
Revenues from licensing royalties
are recognized when the Company’s performance obligations are satisfied upon its licensee’s sales to its customers.
The Company primarily invoices its licensee on a quarterly basis, net of returns. The Company did not realize material revenues
during the quarter ended September 30, 2020.
Going Concern
The Company’s financial
statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern
which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not
yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern,
has reoccurring net losses and net capital deficiency. The ability of the Company to continue as a going concern is dependent on
the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain
adequate capital, it could be forced to cease operations. These factors raise substantial doubt about the Company’s ability
to continue as a going concern. The accompanying financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
In order to continue as a going
concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources
for the Company include (i) obtaining capital from management and significant stockholders sufficient to meet its minimal operating
expenses; (ii) obtaining funding from outside sources through the sale of its debt and/or equity securities; and (iii) completing
a merger with or acquisition of an existing operating company. However, management cannot provide any assurances that the Company
will be successful in accomplishing any of its plans.
NOTE 3 – NOTES AND CONVERTIBLE
NOTES PAYABLE
The Company’s notes payable consist
of the following:
Note Description
|
|
Sepember30,
2020
|
|
|
June 30,
2020
|
|
Notes Payable:
|
|
|
|
|
|
|
Notes Payable matured in December 2018 a nominal interest rate
of 12%
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
Related Party Note Payable due October 2020 a nominal interest
rate of 6%
|
|
|
84,560
|
|
|
|
84,560
|
|
Total Notes payable
|
|
$
|
104,560
|
|
|
$
|
104,560
|
|
Accrued interest
|
|
|
11,324
|
|
|
|
8,900
|
|
Total notes payable, net
|
|
$
|
115,484
|
|
|
$
|
113,460
|
|
Throughout the three months
ended September 30, 2020 the Company did not have the financial resources to make current payments on these notes payable. The
Company is in negotiations with the note holders and has not incurred significant penalties associated with the current default.
The Company’s convertible notes payable consist of the
following:
Convertible Note Description
|
|
September 30, 2020
|
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
Notes payable convertible into common stock at $0.10 per share;
|
|
|
|
|
|
|
nominal interest rate of 12%; and matured in April 2018 (related
|
|
|
|
|
|
|
party)
|
|
$
|
65,000
|
|
|
$
|
65,000
|
|
rate of 12%; and matures in the third quarter of fiscal 2021
|
|
|
64,484
|
|
|
|
65,129
|
|
Notes payable convertible into common stock at $0.10 per share; nominal interest
|
|
|
|
|
|
|
|
|
rate of 12%; and matures in the fourth quarter of fiscal 2021
|
|
|
50,000
|
|
|
|
50,000
|
|
Total convertible notes payable
|
|
$
|
179,484
|
|
|
$
|
180,129
|
|
Accrued interest
|
|
|
71,669
|
|
|
|
68,234
|
|
Total convertible notes payable, net
|
|
$
|
251,153
|
|
|
$
|
248,363
|
|
The Company’s outstanding
convertible notes, with the exception of the related party notes as further discussed in Note 5, automatically convert to shares
of common stock and $0.10 per share upon maturity if not paid in full prior to maturity. The Company did not make any monthly and
interest payments on its outstanding convertible notes payable.
During the three months ended September 30, 2020 and 2019 the
Company recognized interest expense on all outstanding notes and convertible notes payable totaling approximately $6,000 and $17,000,
respectively.
NOTE 5 – RELATED PARTY TRANSACTIONS
From time to time the Company has received
working capital advances from shareholders. These advances are used to settle the Company’s on-going operating expenses.
The shareholders have agreed to not accrue interest on the notes, and they are due on demand. Through September 30, 2020 the shareholders
have informally agreed to defer payment until the Company’s operations are generating sufficient cash flows, however, they
are under no obligation to do so in the future. The Company did not enter into any material related party transactions during the
three months ended September 30, 2020.
NOTE 6 – SUBSEQUENT EVENTS
In October 2020, the Company entered into
a promissory note with an investor in which the Company received total cash proceeds of $100,000. The promissory note has a nominal
interest rate of 6% per annum and matures on June 30, 2021.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
The following management
discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim
consolidated financial statements and related notes which are included in Item 1 of this Quarterly Report on Form 10-Q, and with
our audited financial statements included in our Form 10-K for the fiscal year ended June 30,2020, filed with the Securities and
Exchange Commission on August 14, 2020.
This discussion and analysis
provides information that management believes is relevant to an assessment and understanding of our results of operations and financial
condition for the periods presented. The following selected financial information is derived from our historical consolidated financial
statements and should be read in conjunction with such consolidated financial statements and notes thereto set forth elsewhere
herein and the “Forward- Looking Statements” explanation included herein.
Overview of Business
We are a health and wellness
company with a focus on nutraceutical and alternative and specialty beverages. Our past development efforts have included weight
loss and weight management products marketed under our iMetabolic® brand and craft beer offerings under our
Record Street™ brand. Current development efforts are focused on alternative and specialty beverages that leverage
and combine the Company’s regulated nutraceutical and beverage manufacturing experience to create novel and trending beverages
that have health benefits, such as waters infused with hemp-based nootropics, cannabinoids, and terpenes. We also are pursuing
the franchising and licensing of the Record Street™ brand for live music venues and brewpubs throughout the United
States.
With fewer barriers to entry,
such as reduced minimum order quantities (MOQs), lower costs of goods sold (COGS), and reduced regulatory licensing requirements,
the Company has determined to focus its brand extensions and product innovations in the health and wellness beverage category.
On June 10, 2020,
RSB entered into a license of the Record Street™ and Stylus™ brands with a related-party private entity,
Alpine Group Inc. (the “Licensee”), that recently opened a brewpub located in Reno, Nevada. Effective as of July 1,
2020, the Licensee will have the exclusive right to brew and distribute Record Street™ and Stylus™ brand
beers in the State of Nevada.
RSB manufactures
and markets its line of Record Street™ branded beers, including its three flagship ales—Blonde Ale, Pale Ale,
and India Pale Ale—and its lager named Stylus™.
In addition to
brewing and off-premise distribution licensing opportunities, RSB has also opened a taproom, restaurant, and lounge that can be
franchised under the Record Street™ brand. RSB taprooms will focus on the sale of Record Street™ branded
beers and are envisioned as music and sports lounges that sell RSB’s beers, affordable fast casual cuisine, and related merchandise.
With RSB’s beers displayed on a prominently featured tap system, beer sales will be the primary revenue driver. The economic
strategy of the tap rooms will be value pricing, high margins, and high volumes. The flagship location for the first RSB taproom
is currently open and operating in Reno, Nevada.
RSB intends to
utilize the excess brewing capacity of the Licensee to restart its beer distribution business and support taproom franchise locations.
As of the end of July 2020, RSB commenced keg barrel products to a distributer based in Reno, Nevada, however, we have not realized
any material revenues to date under the licensing agreement.
Going Concern
Our financial statements are
prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of business. We have not yet established an ongoing
source of revenues sufficient to cover our operating costs and to allow us to continue as a going concern. Our ability to continue
as a going concern is dependent on our company obtaining adequate capital to fund operating losses until we become profitable.
If we are unable to obtain adequate capital, we could be forced to significantly curtail or cease operations.
In its report on our financial
statements for the year ended June 30, 2020, our independent registered public accounting firm included an explanatory paragraph
regarding substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
We will need to raise additional
funds to finance continuing operations. However, there are no assurances that we will be successful in raising additional funds.
Without sufficient additional financing, it would be unlikely for us to continue as a going concern. Our ability to continue as
a going concern is dependent upon our ability to successfully accomplish the plans described in this annual report and eventually
secure other sources of financing and attain profitable operations.
RESULTS OF OPERATIONS
The Company’s revenue is generated
through the sale of its beer products. Effective July 1, 2020 the Company entered into a licensing agreement in which the Company
will receive 25% of beer sales distributed outside the gastropub operated my licensee. The licensee began its gastropub operations
in late April 2020. As of, and through September 30, 2020 we did not realize any material revenue under our licensing agreement.
Professional Fees
During the three months ended
September 30, 2020 and 2019, the Company recognized professional fees of approximately $46,000 and $24,000, respectively, representing
an increase of approximately 92 from the prior comparable period. This increase is the result of the Company engaging accounting
consultants and auditors to assist in meeting the Company’s financial reporting obligations which were delinquent during
the comparable periods in fiscal 2019.
The Company expects its professional
fees to decline throughout the remainder of the first half of fiscal 2021 as it expects to meet its compliance obligations on a
timely basis.
General and Administrative Expenses
The Company incurred general and administrative expenses totaling
approximately $2,500 and $2,100 for the three months ended September 30, 2020 and 2019, respectively. Similar to other
operational items, our funding challenges have resulted in overall declines in activity and corresponding expenses incurred.
We expect these items to increase over the next several periods with the success of our business plans and will primarily
consist of facilities costs, management and other salaries, travel, and other corporate overhead.
Interest Expense
Throughout fiscal 2020 we settled
several of our previously outstanding promissory notes and convertible promissory notes payable. As a result, interest expense
decreased approximately 65% to approximately $6,000 from the prior three-month period ended September 30. Our future interest expense
obligations are dependent on the types of financing arrangements we are successful in arranging over the next twelve months, if
any.
Liquidity and Capital Resources
As of September 30, 2020, the
Company had a working capital deficit of approximately $638,000. We estimate that, over the next twelve months, in order to maintain
reporting company status as defined under the Securities Exchange Act of 1934, we will require cash for general and administrative
expenses and professional fees, which include accounting, legal and other professional fees, as well as filing fees. We believe
we will be able to meet these costs through the use of existing cash and cash equivalents or additional amounts, as necessary,
to be loaned by or invested in us by our stockholders, management or other investors. However, no assurance can be given that we
will be able to raise additional capital, when needed or at all, or that such capital, if available, will be on acceptable terms.
In the absence of obtaining additional financing, we may be unable to fund our operations.
During the three months ended
September 30, 2020, the Company’s operational cash flows primarily consisted of incurring expenses in the normal course of
business at levels commensurate with its funding levels and resulting inabilities to commence commercially viable operations. The
Company’s operational cash uses primarily consisted of the incurrence of on-going professional and general and administrative
expenses for the three months ended September 30, 2020. The Company expects these operational cash uses to continue until sufficient
capital is raised, if any.
The Company does not have sufficient
resources to engage in significant investing activities.
During the three months ended
September 2020, the Company generated did not engage in any financing activities.
Off-Balance Sheet Arrangements
We do not have any off-balance
sheet arrangements as set forth in Item 303(a)(4) of the Regulation S-K.
Critical Accounting Policies
Our
Unaudited Financial Statements and Notes to Unaudited Financial Statements have been prepared in accordance with U.S. GAAP.
The preparation of these financial statements requires management to make estimates, judgments, and assumptions that affect reported
amounts of assets, liabilities, revenues, and expenses. We continually evaluate the accounting policies and estimates used to prepare
the accompanying financial statements. The estimates are based on historical experience and assumptions believed to be reasonable
under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain
accounting policies that require significant management estimates and are deemed critical to our results of operations or financial
position are discussed in our Annual Report on Form 10-K for the year ended June 30, 2020.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under
the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls
and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures
of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under
the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal
financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2020 our
disclosure controls and procedures were not effective due to the size and nature of the existing business operation. Given the
size of our current operation and existing personnel, the opportunity to implement internal control procedures that segregate accounting
duties and responsibilities is limited. Until the organization can increase in size to warrant an increase in personnel, formal
internal control procedure will not be implemented until they can be effectively executed and monitored. As a result of the size
of the current organization, there will not be significant levels of supervision, review, independent directors nor formal audit
committee.
Changes in Internal Control Over Financial Reporting
During the three months ended
September 30, 2020, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.