Centaurus Diamond Technologies, Inc.
Statements of Cash Flows
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CASH FLOWS
FROM OPERATING ACTIVITIES:
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|
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Net
loss
|
$
(239,966
)
|
$
(463,806
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
Stock issued
for services
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-
|
11,000
|
Depreciation
expense
|
400
|
1,600
|
Changes in
operating assets and liabilities:
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|
|
Deposits
|
-
|
(19,340
)
|
Accounts
payable and accrued expenses
|
(53,757
)
|
41,776
|
Default
judgement liability
|
720
|
720
|
Net cash used
in operating activities
|
(292,603
)
|
(428,050
)
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|
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CASH FLOWS
FROM INVESTING ACTIVITIES:
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Acquisition
of equipment
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(5,000
)
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-
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Net cash used
in investing activities
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(5,000
)
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-
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CASH FLOWS
FROM FINANCING ACTIVITIES:
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Cash received
from stock subscriptions
|
50,000
|
225,600
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Advance
received from (repaid to) stockholders
|
257,379
|
204,446
|
Repayment of
capital lease
|
(8,000
)
|
-
|
|
|
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Net cash
provided by financing activities
|
299,379
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430,046
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Net change in
cash
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1,776
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1,996
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Cash at
beginning of the reporting period
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15,151
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13,155
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Cash at end
of the reporting period
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$
16,927#
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$
15,151
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|
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SUPPLEMENTAL
DISCLOSURE OF CASH FLOWS INFORMATION:
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Interest
paid
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$
-
|
$
-
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Income tax
paid
|
$
-
|
$
-
|
|
|
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NON CASH
FINANCING AND INVESTING ACTIVITIES:
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Acquisition
of equipment via capital lease
|
$
50,000
|
$
-
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Conversion of
SH advances to APIC
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$
620,307
|
$
-
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Stock issued
to fulfil stock subscriptions
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$
-
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$
236,600
|
See accompanying notes to the consolidated financial
statements.
Centaurus Diamond Technologies, Inc.
March
31, 2018 and 2017
Notes to the Financial Statements
Note 1 – Organization and Operations
Centaurus Diamond Technologies, Inc.
Centaurus Diamond Technologies, Inc., Inc. ("the Company") was
incorporated under the laws of the State of Nevada on July 24,
2007.
The
Company has not commenced principal operations and there are
various risks and uncertainties to its existence, ability to
produce revenue, etc.
Innovative Sales
Innovative Sales (“Innovative”) was incorporated on
July 27, 2001 under the laws of the State of Nevada. The Company
engages in the business of research and development of industrial
grade cultured diamonds that are chemically, optically and
physically the same as their natural counterparts.
Acquisition of Innovative Sales Treated as a Reverse
Acquisition
On June 5, 2012 (the "Closing Date"), the Company closed an asset
acquisition pursuant to the terms of the Asset Acquisition
Agreement (the "Acquisition Agreement") by and between the Company
and Innovative, whereby the Company acquired all of the assets of
Innovative consisting of a cultured diamond technology patent and
related intellectual property (the "Assets") in exchange for: (a)
43,850,000 shares (the "Consideration Shares") of Centaurus's
restricted common stock (the "Acquisition") (these shares were
issued on June 7, 2012), (b) Centaurus's assumption of certain debt
of Innovative in an amount not to exceed $100,000, (c) the
satisfaction of all of Centaurus's debts and liabilities as of the
Closing Date, and (d) Centaurus's simultaneous close on a private
placement (the "Private Placement") of Centaurus's common stock and
warrants to purchase shares of Centaurus's common stock for gross
proceeds of at least $500,000, plus the amount necessary to pay any
of Centaurus's remaining pre-closing debts, including, but not
limited to, all legal and accounting costs associated with the
preparation and filing of Centaurus's Annual Report on Form 10-K
for the fiscal year ended March 31, 2012. The shares issued
represented approximately 60.1% of the issued and outstanding
common stock immediately after the consummation of the Acquisition
Agreement.
As a result of the controlling financial interest of the former
stockholder of Innovative, for financial statement reporting
purposes, the merger between the Company and Innovative has been
treated as a reverse acquisition with Innovative deemed the
accounting acquirer and the Company deemed the accounting acquiree
under the acquisition method of accounting in accordance with
section 805-10-55 of the FASB Accounting Standards Codification.
The reverse acquisition is deemed a capital transaction and the net
assets of Innovative (the accounting acquirer) are carried forward
to the Company (the legal acquirer and the reporting entity) at
their carrying value before the acquisition. The acquisition
process utilizes the capital structure of the Company and the
assets and liabilities of Innovative which are recorded at their
historical cost. The equity of the Company is the historical equity
of Innovative retroactively restated to reflect the number of
shares issued by the Company in the transaction.
Note 2 – Summary of Significant Accounting
Policies
Critical Accounting Policies and Use of Estimates
In the opinion of Management, all adjustments necessary for a fair
statement of results for the fiscal years presented have been
included. These financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP)
generally accepted in the United States of America.
GAAP requires the Company to make estimates and judgments that
affect the reported amounts of assets. On an on-going basis, the
Company evaluates its estimates and judgments, including those
related to revenue recognition, inventories, adequacy of allowances
for doubtful accounts, valuation of long-lived assets, income
taxes, equity-based compensation, litigation and warranties. The
Company bases its estimates on historical and anticipated results
and trends and on various other assumptions that the Company
believes are reasonable under the circumstances, including
assumptions as to future events.
The policies discussed below are considered by management to be
critical to an understanding of the Company’s financial
statements. These estimates form the basis for making judgments
about the carrying values of assets and liabilities that are not
readily apparent from other sources. By their nature, estimates are
subject to an inherent degree of uncertainty. Actual results may
differ from those estimates.
Cash and Cash Equivalents
There are only cash accounts included in our cash equivalents in
these statements. For purposes of the statement of cash flows, the
Company considers all short-term securities with a maturity of
three months or less to be cash equivalents. There are no
short-term cash equivalents reported in these financial
statements.
Property and Equipment
Property and equipment are to be stated at cost less accumulated
depreciation.
Depreciation is recorded on a straight-line
basis over the estimated useful lives of the assets, which range
from three to ten years and are typically consistent with tax-basis
useful lives.
Maintenance and repairs
are charged to operations as incurred.
Revenue Recognition
The Company has generated no revenue as of the date of this
filing.
The Company will recognize product revenue, net of sales discounts,
returns and allowances, in accordance Securities and Exchange
Commission Staff Accounting Bulletin No. 104, “Revenue
Recognition” (“SAB No. 104”) and ASC 605. These
statements establish that revenue can be recognized when persuasive
evidence of an arrangement exists, delivery has occurred and all
significant contractual obligations have been satisfied, the fee is
fixed or determinable, and collection is considered
probable.
Inventory
The Company records inventory at the lower of cost or fair market
value.
Income Taxes
The company has net operating loss carryforwards as of March 31,
2018 totaling $3,310,359. A deferred tax benefit of approximately
$695,175 has been offset by a valuation allowance of the same
amount as its realization is not assured.
Due to the current uncertainty of realizing the benefits of the tax
NOL carry-forward, a valuation allowance equal to the tax benefits
for the deferred taxes has not been established. The full
realization of the tax benefit associated with the carry-forward
depends predominately upon the Company’s ability to generate
taxable income during future periods, which is not
assured.
Long-Lived Assets
Long-lived assets to be held and used are tested for recoverability
whenever events or changes in circumstances indicate that the
related carrying amount may not be recoverable. When required,
impairment losses on assets to be held and used are recognized
based on the fair value of the asset. Certain long-lived assets to
be disposed of by sale are reported at the lower of carrying amount
or fair value less cost to sell.
Fair Values of Financial Instruments
ASC 825 requires the Corporation to disclose estimated fair value
for its financial instruments. Fair value estimates, methods, and
assumptions are set forth as follows for the Corporation’s
financial instruments. The carrying amounts of cash, receivables,
other current assets, payables, accrued expenses and notes payable
are reported at cost but approximate fair value because of the
short maturity of those instruments.
Stock-Based Compensation
The Company accounts for employee and non-employee stock awards
under ASC 718, whereby equity instruments issued to employees for
services are recorded based on the fair value of the instrument
issued and those issued to non-employees are recorded based on the
fair value of the consideration received or the fair value of the
equity instrument, whichever is more reliably
measurable.
Effects of Recently Issued Accounting Pronouncements
The Company has reviewed all recently issued accounting
pronouncements noting that they do not affect the financial
statements.
Per Share Computations
Basic net earnings per share are computed using the
weighted-average number of common shares outstanding. Diluted
earnings per share is computed by dividing net income by the
weighted-average number of common shares and the dilutive potential
common shares outstanding during the period. All shares were
considered anti-dilutive at March 31, 2018 and 2017.
Reclassification
Certain reclassifications have been made to conform to prior
periods’ data to the current presentation. These
reclassifications had no effect on reported income.
Fiscal Year End
The
Company elected March 31st as its fiscal year ending
date.
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB
Accounting Standards Codification for the disclosure of subsequent
events. The Company will evaluate subsequent events through the
date when the financial statements were issued. Pursuant to ASU
2010-09 of the FASB Accounting Standards Codification, the Company
as an SEC filer considers its financial statements issued when they
are widely distributed to users, such as through filing them on
EDGAR.
Derivative Financial Instruments
The
Company evaluates all of its agreements to determine if such
instruments have derivatives or contain features that qualify as
embedded derivatives. For derivative financial instruments that are
accounted for as liabilities, the derivative instrument is
initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported in the
statements of operations. For stock-based derivative financial
instruments, the Company uses a weighted average
Black-Scholes-Merton option pricing model to value the derivative
instruments at inception and on subsequent valuation dates. The
classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is
evaluated at the end of each reporting period. Derivative
instrument liabilities are classified in the balance sheet as
current or non-current based on whether or not net-cash settlement
of the derivative instrument could be required within 12 months of
the balance sheet date. As of March 31, 2018, the Company’s
only derivative financial instrument was an embedded conversion
feature associated with convertible promissory note due to certain
provisions that allow for a change in the conversion price based on
a percentage of the Company’s stock price at the date of
conversion.
Note 3 – Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern, which
contemplates the recoverability of assets and the satisfaction of
liabilities in the normal course of business. Since its inception,
the Company has been engaged substantially in financing activities
and developing its business plan and marketing. For the year ended
March 31, 2018, the Company incurred a net loss of $(239,966) and
the net cash flow used in operations was $(292,603) and its
accumulated net losses from inception through the period ended
March 31, 2017 is $(3,310,359), which raises substantial doubt
about the Company’s ability to continue as a going concern.
In addition, the Company’s development activities since
inception have been financially sustained through capital
contributions from shareholders.
The ability of the Company to continue as a going concern is
dependent upon its ability to raise additional capital from the
sale of common stock or through debt financing and, ultimately, the
achievement of significant operating revenues. These financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or
amounts and classification of liabilities that might result from
this uncertainty.
Our
activities have been financed primarily from the advances of major
shareholder.
The
Company plans to raise additional funds through debt or equity
offerings. There is no guarantee that the Company will be able to
raise any capital through this or any other offerings.
Note 4 – Property and Equipment
The Company has acquired all of its office and field work equipment
with cash payments. The total fixed assets consist of various
equipment items and the totals are as follows:
Asset
|
|
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Equipment
|
$
63,000
|
$
8,000
|
Accumulated depreciation
|
(8,000
)
|
7,600
|
Net Fixed Assets
|
$
55,000
|
$
400
|
Depreciation
expenses for the years ended March 31, 2018 and 2017 was $400 and
$1,600, respectively.
Note 5 – Advances from Stockholders and Related Party
Transactions
Related Parties
Related parties with whom the Company had transactions
are:
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Related Parties
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Relationship
|
Alvin
Snaper
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Chairman
and majority stockholder of the Company
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Chas
Radovich
|
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CEO and
Stockholder of the Company
|
Leroy
Delisle
|
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Stockholder
of the Company
|
Advances from and Stockholders
From
time to time, stockholders of the Company advance funds to the
Company for working capital purposes. Those advances are unsecured,
non-interest bearing and due on demand. Below are the details of
the advances by party:
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Balance at March 31,
2016
Advances
for the year ended
|
$
170,016
|
$
106,378
|
-
|
$
276,394
|
March 31, 2017
|
115,069
|
89,377
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-
|
204,446
|
Balance at March 31, 2017
Advances
for the six months
|
285,085
|
195,755
|
-
|
480,840
|
ended September 30, 2017
|
66,685
|
61,782
|
-
|
139,467
|
Advances converted to APIC
|
(334,370
)
|
(285,937
)
|
-
|
(620,307
)
|
Balance at September 30, 2017
Advances
from October 1, 2017
|
-
|
-
|
-
|
-
|
to March 31, 2018
|
3,312
|
105,600
|
9,000
|
117,912
|
Balance at March 31, 2018
|
3,312
|
105,600
|
9,000
|
117,912
|
Operating Lease from Chairman
On June 5, 2012 the Company entered into a lease agreement, for
office space for its corporate office at 1000 W. Bonanza, Las
Vegas, Nevada 89106, with its Chairman, Alvin Snaper, at $2,500
plus utilities per month on a month-to-month basis, effective June
15, 2012. During the years ended March 31, 2018 and 2017, the
Company has paid or accrued $49,913 and $30,000, respectively, of
rent.
Note 6 – Stockholders' Equity
Shares Authorized
Upon formation the total number of shares of all classes of capital
stock which the Company is authorized to issue is four hundred
fifty million (450,000,000) shares with a par value of $0.001, all
of which are designated as Common Stock.
Common Stock
Immediately
prior to the consummation of the Acquisition Agreement on June 5,
2012, the Company had 113,525,000 common shares issued and
outstanding.
Upon
consummation of the Acquisition Agreement on June 5, 2012, the then
majority stockholders of the Company surrendered 85,575,000 shares
of the Company's common stock which was cancelled upon receipt and
the Company issued 43,850,000 shares of its common stock pursuant
to the terms and conditions of the Acquisition
Agreement.
On
February 3, 2016, the Company issued 7,103,333 shares at various
values to fulfil $212,000 of stock subscriptions.
On
February 3, 2016, the Company issued 6,150,000 shares of common
stock to acquire the Autogenous Impact Mill technology from one of
its stockholders at a value of $6,150. The stockholder owned the
asset for over 20 years and the asset was fully depreciated. Assets
acquired from related parties are recorded and the seller’s
depreciated value; therefore, the Company recorded the asset at $1.
The remaining $6,149 was recorded as research and development
expenses.
On February 3, 2016, the Company issued 120,000 shares of common
stock at $0.03 per share as a payment against an accounts payable
balance.
On February 3, 2016, the Company issued 111,000 shares of common
stock at $0.0495 per share as a payment against an accounts payable
balance.
Between
September 3, 2015 and November 5, 2015, the Company issued
1,161,290 shares at an average value of $0.011 as a $13,000 payment
towards a note payable.
On June 8, 2015, the Company issued 30,000,000 shares of common
stock at $0.005 per share to pay down $150,000 of the advances from
shareholders.
On June
8, 2015, the Company issued 30,000,000 shares of common stock at
$0.005 per share for a total of $150,000 in exchange for
services.
On June
8, 2015, the Company issued 1,000,000 shares of common stock at
$0.005 per share for a total of $5,000 in exchange for website
design services.
On
February 3, 2016, the Company issued 70,675,000 shares of common
stock at $0.013 per share in exchange for $918,775 of
services.
On May
18, 2016, the Company issued 5,747,000 shares of common stock at
various values to fulfil $354,700 of stock
subscriptions.
There are
226,267,623 and
220,520,623 shares of common stock issued as of March 31, 2018 and
2017, respectively.
Stock Subscriptions
The
Company received $50,000 and $225,600 of stock subscriptions during
the years ended March 31, 2018 and 2017, respectively. On May 18,
2016, the Company issued 5,747,000 shares at various values to
fulfil $354,700 of the stock subscriptions. The total stock
subscription balance is $50,000 and $0 as of March 31, 2018 and
2017, respectively. This is an accrual account used to capture
stock-cash timing differences while presenting information
consistent with transfer agent records.
On November 1, 2017, the Company entered into a stock purchase
agreement with an outside investor; whereby 1,000,000 shares were
to be issued for $0.05 per share for a total of $50,000. The
$50,000 was received from the outside investor on November 16, 2017
and the shares are yet to be issued; therefore, the Company has
recorded a stock subscription liability of $50,000 on the balance
sheet.
Note 7: Convertible Promissory Notes
During
the year ended March 31, 2016, the Company issued a revolving
convertible promissory note to an investor for borrowing up to
$250,000. The Company borrowed $25,000 under this revolving
convertible promissory note during the year ended March 31, 2016 as
follows: $2,500 paid directly towards legal and document fees,
$5,500 paid directly towards interest expense and $17,000 deposited
into the Company’s bank account. The convertible promissory
note (i) are unsecured, (ii) bear interest at the rate of 5% per
annum (of which six months is guaranteed with each funding), and
(iii) are due the 45 days after the funding of the initial funding
and six months after all subsequent funding. The convertible
promissory note is convertible at any time at the option of the
investor into shares of the Company’s common stock that is
determined by dividing the amount to be converted by the lowest
trading price of the Company’s common stock during the five
days prior to conversion. If the convertible is in default, the
convertible promissory note is into shares of the Company’s
common stock that is determined by dividing the amount to be
converted by 60% the lowest trading price of the Company’s
common stock during the five days prior to conversion.
Due to
the potential adjustment in the conversion price associated with
this convertible promissory note based on the Company’s stock
price, the Company has determined that the conversion feature is
considered a derivative liability. The embedded conversion feature
was initially calculated to be $22,739 which are recorded as a
derivative liability as of the date of issuance. The derivative
liability was recorded as a debt discount to the convertible
promissory note. The debt discount is being amortized over the term
of the convertible promissory note. The Company recognized interest
expense of $22,739 during the year ended March 31, 2016 related to
the amortization of the debt discount. Also during the year ended
March 31, 2016, this revolving convertible promissory note was
cancelled and any remaining balances of the convertible note and
derivative liability were combined into a note payable. The balance
of this note payable is $12,000 as of March 31, 2018 and
2017.
Note 8 – Income Tax Provision
Deferred tax assets
At March 31, 2018, the Company had net operating loss
(“NOL”) carry–forwards for Federal income tax
purposes of $3,310,359 that may be offset against future taxable
income through 2038. The carry-forwards begin to expire in the year
2027. No tax benefit has been reported with respect to these net
operating loss carry-forwards in the accompanying financial
statements because the Company believes that the realization of the
Company’s net deferred tax assets of approximately $695,175
was not considered more likely than not and accordingly, the
potential tax benefits of the net loss carry-forwards are fully
offset by a full valuation allowance.
Deferred tax assets consist primarily of the tax effect of NOL
carry-forwards. The Company has provided a full valuation allowance
on the deferred tax assets because of the uncertainty regarding its
realization. The valuation allowance increased approximately
$50,392 and $95,090 for the reporting period ended March 31, 2018
and 2017, respectively.
Components of deferred tax assets are as follows:
Net deferred taxes
– Non-current
|
|
|
Expected income tax
benefit from NOL carry-forwards
|
$
695,175
|
$
644,783
|
Less valuation
allowance
|
695,175
|
644,783
|
Deferred tax
assets, net of valuation allowance
|
-
|
-
|
Income taxes in the statements of operations
A reconciliation of the federal statutory income tax rate and the
effective income tax rate as a percentage of income before income
taxes is as follows:
|
|
|
Federal statutory
income tax rate
|
21.0
%
|
21.0
%
|
Change in valuation
allowance on net operating loss
carry-forwards
|
(21.0
%)
|
(21.0
)
|
Effective income
tax rate
|
-
|
-
|
Note 9 - Commitments, Contingencies and Concentrations
Except
for as follows the Company does not have any commitments,
contingencies or concentrations:
In May
2017, the Company lost a civil suit whereby the court awarded the
plaintiff a default judgment of $112,968. See Note 7. The Company
has accrued $114,408 and $113,688 for this judgement as of March
31, 2018 and 2017, respectively. There were no legal fees incurred
with respect to this default judgement.
Note 10 - Lease Obligations Payable
The Company leases specialized equipment under leases classified as
capital leases. The leased equipment will be amortized on a
straight-line basis over 5 years once it is placed in service. The
following is a schedule showing the future minimum lease payments
under capital leases by years and the present value of the minimum
lease payments as of March 31, 2018. There is no interest rate
related to the lease obligation and the maturity date is September
2021.
Fiscal year ending March 31:
2019
|
$
12,000
|
2020
|
12,000
|
2021
|
12,000
|
2022
|
6,000
|
Total minimum lease payments
|
42,000
|
Less: Amount representing
interest
|
-
|
Present
value of minimum lease payments
|
$
42,000
|
At March 31, 2018, the present value of minimum lease payments due
within one year is $12,000.
Note 11 –
Subsequent
Events
In
preparing the financial statements, management has evaluated events
and transactions for potential recognition or disclosure through
the date that the financial statements were available to be issued
and determined there were no subsequent events resulting in
adjustments to or disclosure in the financial statements, except as
follows:
Subsequent to March 31, 2018, the Company received $20,000 of stock
subscriptions from outside investors as follows:
On June 4, 2018, the Company entered into a stock purchase
agreement with an outside investor; whereby 400,000 shares were to
be issued for $0.05 per share for a total of $20,000. The $20,000
was received from the outside investor on June 4, 2018 and the
shares are yet to be issued; therefore, the Company has recorded a
stock subscription of $20,000 on the balance sheet.
Subsequent
to March 31, 2018, stockholders have advanced funds to the Company
or have paid for expenses on behalf of the Company. See the roll
forward of stockholder advances below:
|
|
|
|
|
Balance at March 31, 2018
Advances from April 1, 2018
to date of issuance of these
|
$
3,312
|
$
105,600
|
$
9,000
|
$
480,840
|
financial statements
|
5,000
|
20,000
|
1,700
|
138,512
|
Balance at date of issuance
|
8,312
|
125,600
|
10,700
|
144,612
|