NOTES
TO FINANCIAL STATEMENTS
NOTE
1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Business
Kibush
Capital Corporation (formerly David Loren Corporation) (the “Company”) includes its 90% owned subsidiary Aqua Mining (PNG).
See Basis of Presentation below. The Company has two primary businesses: (i) mining exploration within Aqua Mining, and (ii) timber operations
in Papua New Guinea by Aqua Mining.
Basis
of Presentation
The
Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United
States of America (“U.S. GAAP”).
The
consolidated financial statements of the Company include the accounts of the Company, and all entities in which a direct or indirect
controlling interest exists through voting rights or qualifying variable interests. All intercompany balances and transactions have been
eliminated in the consolidated financial statements.
Change
in Fiscal Year End
The
Board of Directors of the Company approved on September 14, 2014, a change in the Company’s fiscal year end from December 31 to
September 30 of each year.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal course of business. As of September 30, 2019, the Company has
an accumulated deficit of $13,728,369 and $13,577,116 as of September 30, 2020, and has not earned sufficient revenues to cover operating
costs since inception and has a working capital deficit of $3,176,185 at September 30, 2020. The Company intends to fund its logging
operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other
cash requirements for the year.
To
assist with company financing, Mr Sheppard has provided a letter of comfort to the company stating that he will not request repayment
of the loan, for a period of not less than 12 months, from the date of signing the accounts.
The
ability of the Company to emerge from the development stage is dependent upon, among other things, obtaining additional financing to
continue mining exploration and execution of its business plan. In response to these problems, management intends to raise additional
funds through public or private placement offerings.
These
factors, among others, 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 result from the outcome of this uncertainty.
Functional
and Reporting Currency
The
consolidated financial statements are presented in U.S. Dollars. The Company’s functional currency is the U.S. Dollar. The functional
currency of Aqua Mining is the Papua New Guinean kina. Assets and liabilities are translated using the exchange rate on the respective
balance sheet dates. Items in the income statement and cash flow statement are translated into U.S. Dollars using the average rates of
exchange for the periods involved. The resulting translation adjustments are recorded as a separate component of other comprehensive
income/(loss) within stockholders’ equity.
The
functional currency of foreign entities is generally the local currency unless the primary economic environment requires the use of another
currency. Gains or losses arising from the translation or settlement of foreign-currency-denominated monetary assets and liabilities
into the functional currency are recognized in the income in the period in which they arise. However, currency differences on intercompany
loans that have the nature of a permanent investment are accounted for as translation differences as a separate component of other comprehensive
income/(loss) within stockholders’ equity.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A
summary of the principal accounting policies is set out below:
Cash
The
Company maintains its cash balances in interest and noninterest bearing accounts which do not exceed Federal Deposit Insurance Corporation
limits.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of Kibush Capital and Aqua Mining. All intercompany accounts and
transactions have been eliminated.
Other
Comprehensive Income and Foreign Currency Translation
FASB
ASC 220-10-05, Comprehensive Income, establishes standards for the reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. Comprehensive income is defined to include all changes in equity except those
resulting from investments by owners and distribution to owners.
The
accompanying consolidated financial statements are presented in United States dollars.
Reclassifications
Reclassifications
have been made to prior year consolidated financial statements in order to conform the presentation to the statements as of and for the
period ended September 30, 2014.
On
June 10, 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-10, Development Stage Entities (Topic 915) – Elimination
of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation,
which eliminates the concept of a development stage entity (DSE) in its entirety from current accounting guidance. The Company has elected
early adoption of this new standard.
Use
of Estimates
The
preparation of financial statements in conformity with Generally Accepted Accounting Principles in the United States of America (“GAAP”)
requires management to make certain 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. Significant estimates made by management are, recoverability of long-lived assets, valuation and useful lives of
intangible assets, valuation of derivative liabilities, and valuation of common stock, options, warrants and deferred tax assets. Actual
results could differ from those estimates.
Non-Controlling
Interests
Investments
in associated companies over which the Company has the ability to exercise significant influence are accounted for under the consolidation
method, after appropriate adjustments for intercompany profits and dividends.
In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” It requires an acquirer to recognize, at the acquisition
date, the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at their full fair values as of
that date. In a business combination achieved in stages (step acquisitions), the acquirer will be required to re-measure its previously
held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss in earnings. The acquisition-related
transaction and restructuring costs will no longer be included as part of the capitalized cost of the acquired entity but will be required
to be accounted for separately in accordance with applicable generally accepted accounting principles. U.S. SFAS No. 141(R) applies prospectively
to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on
or after December 15, 2008.
A
non-controlling interest in a subsidiary is an ownership interest in a consolidated entity that is reported as equity in the consolidated
financial statements and separate from the Company’s equity. In addition, net income/(loss) attributable to non-controlling interests
is reported separately from net income attributable to the Company in the consolidated financial statements. The Company’s consolidated
statements present the full amount of assets, liabilities, income, and expenses of all of our consolidated subsidiaries, with a partially
offsetting amount shown in non-controlling interests for the portion of these assets and liabilities that are not controlled by us.
For
our investments in affiliated entities that are included in the consolidation, the excess cost over underlying fair value of net assets
is referred to as goodwill and reported separately as “Goodwill” in our accompanying consolidated balance sheets. Goodwill
may only arise where consideration has been paid.
Property
and Equipment
Property
and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives as follows:
Plant
equipment
|
|
2
to 15 years
|
Motor
Vehicle
|
|
4
to 15 years
|
Maintenance
and repairs are charged to expense as incurred. Renewals and improvements of a major nature are capitalized. At the time of retirement
or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting
gains or losses are reflected in the consolidated statement of operations.
Impairment
of Long-Lived Assets
In
accordance with FASB ASC 360-10-5, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company evaluates the carrying
value of its long-lived assets for impairment whenever events or changes in circumstances indicate that such carrying values may not
be recoverable. The Company uses its best judgment based on the current facts and circumstances relating to its business when determining
whether any significant impairment factors exist. The Company considers the following factors or conditions, among others, that could
indicate the need for an impairment review:
|
●
|
Significant
under performance relative to expected historical or projected future operating results;
|
|
●
|
Significant
changes in its strategic business objectives and utilization of the assets;
|
|
●
|
Significant
negative industry or economic trends, including legal factors;
|
If
the Company determines that the carrying values of long-lived assets may not be recoverable based upon the existence of one or more of
the above indicators of impairment, the Company’s management performs an undiscounted cash flow analysis to determine if impairment
exists. If impairment exists, the Company measures the impairment based on the difference between the asset’s carrying amount and
its fair value, and the impairment is charged to operations in the period in which the long-lived asset impairment is determined by management.
During
the year ended September 30, 2020, the Aqua Mining business continued to generate material operating losses. Consequently, management
has re-assessed the carrying value of the existing plant and equipment and its ability to generate positive cash flows over the remaining
useful life of the group of assets used within the Timber milling business. Managements current assessment, which takes into consideration
the ongoing uncertain impacts of COVID-19 on market supply chains and the access to equipment required for timber processing facility
enhancements, indicates that the current group of assets are impaired and need to be written down to a carrying value indicative representative
of fair value. Managements current assessment of the carrying value is nil as there is no reliable secondary market at present for these
assets in the Port Moresby region combined with other market constraints relating to COVID-19 impacts on supply chains. Management will
continue to explore opportunities to expand the supply and processing capacity of the timber milling process with a view to re-assessing
the carrying value of the asset group should positive operating cash flows start to be generated in future periods.
The
carrying value of the Company’s investment in Joint Venture contract with leaseholders of certain Mining Leases in Papua New Guinea
represents its ownership, accounted for under the equity method. The ownership interest is not adjusted to fair value on a recurring
basis. Each reporting period the Company assesses the fair value of the Company’s ownership interest in Joint Venture in accordance
with FASB ASC 325-20-35. Each year the Company conducts an impairment analysis in accordance with the provisions within FASB ASC 320-10-35
paragraphs 25 through 32.
Fair
Value of Financial Instruments
The
carrying amounts of the Company’s cash, accounts payable and accrued expenses approximate their estimated fair values due to the
short-term maturities of those financial instruments. The Company believes the carrying amount of its notes payable approximates its
fair value based on rates and other terms currently available to the Company for similar debt instruments
Beneficial
Conversion Features of Debentures
In
accordance with FASB ASC 470-20, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios, we recognize the advantageous value of conversion rights attached to convertible debt. Such rights give the debt holder
the ability to convert debt into common stock at a price per share that is less than the trading price to the public on the day the loan
is made to us. The beneficial value is calculated as the intrinsic value (the market price of the stock at the commitment date in excess
of the conversion rate) of the beneficial conversion feature of debentures and related accruing interest is recorded as a discount to
the related debt and an addition to additional paid in capital. The discount is amortized over the remaining outstanding period of related
debt using the interest method.
Derivative
Financial Instruments
We
apply the provisions of FASB ASC 815-10, Derivatives and Hedging (“ASC 815-10”). Derivatives within the scope of ASC
815-10 must be recorded on the balance sheet at fair value. During the year ended September 30, 2014, the Company issued convertible
debt and recorded derivative liabilities related to a reset provision associated with the embedded conversion feature of the convertible
debt. The Company computed the fair value of these derivative liabilities on the grant date and various measurement dates using the Black-Scholes
pricing model. Due to the reset provisions within the embedded conversion feature, the Company determined that the Black-Scholes pricing
model was the most appropriate for valuing these instruments.
In
applying the Black-Scholes valuation model, the Company used the following assumptions during the year ended September 30, 2020:
|
|
For the year ended
|
|
|
|
September
30, 2020
|
|
Annual dividend yield
|
|
|
-
|
|
Expected life (years)
|
|
|
0.50
– 1.00
|
|
Risk-free interest rate
|
|
|
2.050
|
%
|
Expected volatility
|
|
|
41
|
%
|
The
inputs used to measure fair value fall in different levels of the fair value hierarchy, a financial security’s hierarchy level
is based upon the lowest level of input that is significant to the fair value measurement.
The
Company determines the fair value of its derivative instruments using a three-level hierarchy for fair value measurements which these
assets and liabilities must be grouped, based on significant levels of observable or unobservable inputs. Observable inputs reflect market
data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires
the use of observable market data when available. These two types of inputs have created the following fair-value hierarchy:
Level
1 — Valuation based on unadjusted quoted market prices in active markets for identical securities. Currently, the Company does
not have any items as Level 1.
Level
2 — Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement
date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. Currently, the
Company does not have any items classified as Level 2.
Level
3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement and involve management
judgment. The Company used the Black-Scholes option pricing models to determine the fair value of the instruments.
The
following table presents the Company’s embedded conversion features of its convertible debt measured at fair value on a recurring
basis as of September 30, 2019, and as of September 30, 2020:
|
|
Carry Value
at
|
|
|
Carry Value
at
|
|
|
|
September
30, 2020
|
|
|
September
30, 2019
|
|
|
|
|
|
|
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
Embedded
conversion features - notes
|
|
$
|
-
|
|
|
$
|
728,080
|
|
|
|
|
|
|
|
|
|
|
Total derivative liability
|
|
$
|
-
|
|
|
$
|
728,080
|
|
|
|
For the year
ended
|
|
|
For the year
ended
|
|
|
|
September
30, 2020
|
|
|
September
30, 2019
|
|
|
|
|
|
|
|
|
Change in fair value included in
other income (expense), net
|
|
|
-
|
|
|
|
-1,209
|
|
The
following table provides a reconciliation of the beginning and ending balances for the Company’s derivative liabilities measured
at fair value using Level 3 inputs:
|
|
For the year
ended
|
|
|
For the year
ended
|
|
|
|
September
30, 2019
|
|
|
September
30, 2019
|
|
Embedded Conversion
|
|
|
|
|
|
|
|
|
Features - Notes:
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
728,080
|
|
|
$
|
726,871
|
|
Change in derivative liabilities
|
|
$
|
-728,080
|
|
|
$
|
2,418
|
|
Net change in fair value
included in net loss
|
|
|
-
|
|
|
|
-1,209
|
|
Ending balance
|
|
$
|
0
|
|
|
$
|
728,080
|
|
The
Company re-measures the fair values of all its derivative liabilities as of each period end and records the net aggregate gain/loss due
to the change in the fair value of the derivative liabilities as a component of other expense, net in the accompanying consolidated statement
of operations. During the years ended September 30, 2020, and 2019, the Company recorded a net increase (decrease) to the fair value
of derivative liabilities balance $0 and -$ 1,209, respectively.
Debt
Consolidation
On
January 14, 2020, the Company entered into a Promissory Note Consolidation Agreement (the “Consolidation Agreement”)
with one of its noteholders, Warren Sheppard., as lender (“Mr. Sheppard”). Pursuant to the terms of the Consolidation
Agreement, the Company consolidated an aggregate of $1,358,692 of outstanding debt obligations (the “Outstanding Debt”),
which included principal and interest, (as listed below ) owed to Mr. Sheppard by the Company.
As
a consequence of the debt consolidation, the derivative Liabilities associated with option component has been extinguished, therefore,
derivative liabilities amounted to $728,080 as of the debt consolidation date are subsequently reversed and charged into profit and losses
in January 2020.
Promissory
Note
|
|
Outstanding
Principal
|
|
|
Outstanding
Interest
|
|
David Loren Corporation. 2% Secured
Promissory Note issued May 1, 2011 to Hoboken Street Associates, and as assigned to Warren Sheppard on July 3, 2013
|
|
|
22,166
|
|
|
|
3,780
|
|
David Loren Corporation. 2% Secured Promissory
Note issued January 2, 2012 to Hoboken Street Associates, and as assigned to Warren Sheppard on July 3, 2013
|
|
|
48,000
|
|
|
|
7,438
|
|
David Loren Corporation. 2% Secured Promissory
Note issued January 3, 2013 to Hoboken Street Associates, and as assigned to Warren Sheppard on July 3, 2013
|
|
|
12,000
|
|
|
|
1,618
|
|
Kibush Capital Corp. 12.5% Secured Promissory
Note issued March 31, 2014 to Warren Sheppard.
|
|
|
157,500
|
|
|
|
104,815
|
|
Kibush Capital Corp. 12.5% Secured Promissory
Note issued June 30, 2014 to Warren Sheppard.
|
|
|
110,741
|
|
|
|
70,384
|
|
Kibush Capital Corp. 12.5% Secured Promissory
Note issued September 30, 2014 to Warren Sheppard.
|
|
|
98,575
|
|
|
|
59,670
|
|
Kibush Capital Corp. 12.5% Secured Promissory
Note issued September 30, 2015 to Warren Sheppard.
|
|
|
316,046
|
|
|
|
153,387
|
|
Kibush Capital Corp.
12.5% Secured Promissory Note issued October 10, 2016 to Warren Sheppard.
|
|
|
155,300
|
|
|
|
37,272
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
920,328
|
|
|
|
438,364
|
|
Upon
the assumption by the Company of the Outstanding Debt, the Company and Mr. Sheppard entered into an unsecured promissory note (the “Consolidated
Note”), which such Consolidated Note restated the repayment terms and conditions of the Outstanding Debt in full. Pursuant
to the terms and conditions of the Consolidated Note, the Outstanding Debt accrues simple interest at 12.5% per year, compounded annually,
and the Consolidated Note has a maturity date of January 15, 2022. No regularly scheduled periodic payments of principal or interest
are due under the Consolidated Note, and, unless there is an earlier event of default, all outstanding and unpaid principal and interest
under the Consolidated Note is due and payable in a single lump sum payment at maturity. The Consolidated Note also removes any common
stock conversion features from previous notes. The Company may prepay the Consolidated Note at any time prior to maturity without penalty.
On
January 9th, 2020, the Company issued Mr Sheppard 14,999,899 Class B Preference Shares and 101 Class C Preference Shares in full satisfaction
of his unpaid 2015 and 2016 Salary of $250,000.
Loss
per Share
The
Company applies FASB ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing earnings (loss)
available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed
similar to basic earnings (loss) per share except that the denominator is increased to include additional common shares available upon
exercise of stock options and warrants using the treasury stock method, except for periods for which no common share equivalents are
included because their effect would be anti-dilutive.
Income
Taxes
Income
taxes are accounted for in accordance with ASC Topic 740, “Income Taxes.” Under the asset and liability method, deferred
tax assets and liabilities are recognized for the future consequences of differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases (temporary differences). Deferred tax assets and liabilities are measured
using tax rates expected to apply to taxable income in the years in which those temporary differences are recovered or settled. Valuation
allowances for deferred tax assets are established when it is more likely than not that some portion or all of the deferred tax assets
will not be realized.
Mineral
Property, Mineral Rights (Claims) Payments and Exploration Costs
Pursuant
to EITF 04-02, “Whether Mineral Rights are Tangible or Intangible Assets and Related Issues”, the Company has an accounting
policy to capitalize the direct costs to acquire or lease mineral properties and mineral rights as tangible assets. The direct costs
include the costs of signature (lease) bonuses, options to purchase or lease properties, and brokers’ and legal fees. If the acquired
mineral rights relate to unproven properties, the Company does not amortize the capitalized mineral costs, but evaluates the capitalized
mineral costs periodically for impairment. The Company expenses all costs related to the exploration of mineral claims in which it had
secured exploration rights prior to establishment of proven and probable reserves.
Accounting
Treatment of Mining Interests
At
this time, the Company does not directly own or directly lease mining properties. However, the Company does have contractual rights and
governmental permits which allow the Company to conduct mining exploration on the properties referenced in this report. These contractual
relationships, coupled with the government permits issued to the Company (or a subsidiary), are substantially similar in nature to a
mining lease. Therefore, we have treated these contracts as lease agreements from an accounting perspective .
Research
and Development
Research
and development costs are recognized as an expense in the period in which they are incurred. The Company incurred no research and development
costs for the years ended September 30, 2020, and 2019, respectively.
Recent
Accounting Pronouncements
In
November 2019, the ASB issued Accounting Standards Update 2019-08-Compensation-Stock Compensation (Topic 718) and Revenue from Contracts
with Customers (Topic 606): Codification Improvements-Share-Based Consideration Payable to a Customer. This ASU will affect companies
that issue share-based payments (e.g., options or warrants) to their customers. Similar to issuing a cash rebate to a customer, issuing
a share-based payment to a customer can incentivize additional purchases. The share-based payments can also serve a strategic purpose
by aligning the interests of a supplier and its customer, because the customer’s additional purchases increase its investment in
the supplier. For entities that have not yet adopted the amendments in Update 2018-07, the amendments in this update are effective in
fiscal years beginning after December 15, 2019. We do not expect the adoption of this ASU to have a material effect on our consolidated
financial statements.
In
November 2019, the FASB issued Accounting Standards Update 2019-09-Financial Services-Insurance (Topic 944). This ASU will affect companies
that issue share-based payments (e.g., options or warrants) to their customers. Similar to issuing a cash rebate to a customer, issuing
a share-based payment to a customer can incentivize additional purchases. The share-based payments can also serve a strategic purpose
by aligning the interests of a supplier and its customer, because the customer’s additional purchases increase its investment in
the supplier. The amendments in this Update are effective in fiscal years beginning after December 15, 2021. We do not expect the adoption
of this ASU to have a material effect on our consolidated financial statements.
In
November 2019, the FASB issued Accounting Standards Update 2019-10-Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging
(Topic 815), and Leases (Topic 842): Effective Dates. This ASU discusses the FASB’s proposed ASU Codification Improvements to Hedge
Accounting, which would clarify certain amendments made by ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, to
the guidance in ASC 815 on hedging activities. The FASB issued the proposal in response to feedback and questions received from stakeholders
related to their implementation of ASU 2017-12. The ASU also discusses the recent issuance of FASB ASU No. 2019-10, Financial Instruments
– Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. The ASU provides a framework
to stagger effective dates for future major accounting standards and amends the effective dates for certain major new accounting standards
to give implementation relief to certain types of entities. Specifically, ASU 2019-10 changes some effective dates for ASU 2017-12 on
hedging, ASU 2016-02 on leasing, ASU 2016-13 on current expected credit losses, and ASU 2017-04 on simplifying the goodwill impairment
test. The amendments in this Update amend the mandatory effective dates Credit Losses for all entities as follows or fiscal years beginning
after December 15, 2019. The effective dates for Hedging after applying this update are as follows: for fiscal years beginning after
December 15, 2018. The effective dates for Leases after applying this Update are as follows for fiscal years beginning after December
15, 2018. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.
In
December 2019, the FASB issued Accounting Standards Update 2019-12-Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.
This ASU summarizes the FASB’s recently issued Accounting Standards Update (ASU) No. 2019-12, simplifying the Accounting for Income
Taxes. The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC 740. The amendments in this update
are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We do not expect the
adoption of this ASU to have a material effect on our consolidated financial statements.
In
January 2020, the FASB issued Accounting Standards Update 2020-01-Investments-Equity Securities (Topic 321), Investments-Equity Method
and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and
Topic 815. This ASU clarifies the interaction between accounting standards related to equity securities (ASC 321), equity method investments
(ASC 323), and certain derivatives (ASC815). The amendments in this Update are effective for fiscal years beginning after December 15,
2020. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.
In
March 2020, the FASB issued Accounting Standards Update 2020-03-Codification Improvements to Financial Instruments. The Standard is part
of FASB’s ongoing project to improve and clarify its Accounting Standards Codification and avoid unintended application. The items
addressed are not expected to significantly affect current practice or create a significant administrative cost for most entities. The
amendment is divided into issues 1 to 7 with different effective dates as follows: The amendments related to Issue 1, Issue 2, Issue
4, and Issue 5 are conforming amendments. For public business entities, the amendments are effective upon issuance of this update. For
all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those
fiscal years beginning after December 15, 2020. The amendment related to Issue 3 is a conforming amendment that affects the guidance
related to the amendments in 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities. The effective date of this update for the amendments to Update 2016-01 is for fiscal years beginning after
December 15, 2019, including interim periods within those fiscal years. For entities that have not yet adopted the amendments related
to Update 2016-13, the effective dates and the transition requirements for these amendments are the same as the effective date and transition
requirements in Update 2016-13. For entities that have adopted the guidance in Update 2016-13, the amendments are effective for fiscal
years beginning after December 15, 2019, including interim periods within those fiscal years. For those entities, the amendments should
be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to opening retained earnings in the statement
of financial position as of the date that an entity adopted the amendments in Update 2016-13. We do not expect the adoption of this ASU
to have a material effect on our consolidated financial statements.
In
June 2020, the FASB issued Accounting Standards Update 2020-05—Revenue from Contracts with Customers (Topic 606) and Leases (Topic
842): Effective Dates for Certain Entities. The amendments in this Update are effective upon issuance.
In
August 2020, the FASB issued Accounting Standards Update 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and
Contracts in an Entity’s Own Equity. The amendments in this Update are effective for public business entities that meet the definition
of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the
SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities,
the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.
Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those
fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. An entity that
has not yet adopted the amendments in Accounting Standards Update No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities
from Equity (Topic 480), Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features,
and (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and
Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception, can early adopt the amendments in this Update for convertible
instruments that include a down round feature. This early adoption is permitted for fiscal years beginning after December 15, 2019.
In
October 2020, the FASB issued Accounting Standards Update 2020-08—Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable
Fees and Other Costs. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2020. Early application is not permitted. All entities should apply the amendments
in this Update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities.
These amendments do not change the effective dates for Update 2017-08. We do not expect the adoption of this ASU to have a material effect
on our consolidated financial statements.
In
October 2020, the FASB issued Accounting Standards Update 2020-10—Codification Improvements. The amendments in Sections B and C
of this Update are effective for annual periods beginning after December 15, 2020, for public business entities. For all other entities,
the amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning
after December 15, 2022. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.
In
January 2021, the FASB issued Accounting Standards Update 2021-01—Reference Rate Reform (Topic 848): Scope. The amendments in this
Update are effective immediately for all entities. We do not expect the adoption of this ASU to have a material effect on our consolidated
financial statements.
In
March 2021, the FASB issued Accounting Standards Update 2021-03—Intangibles—Goodwill and Other (Topic 350): Accounting Alternative
for Evaluating Triggering Events. The amendments in this Update are effective on a prospective basis for fiscal years beginning after
December 15, 2019. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made
available for issuance as of March 30, 2021. An entity should not retroactively adopt the amendments in this Update for interim financial
statements already issued in the year of adoption. The amendments in this Update also include an unconditional one-time option for entities
to adopt the alternative prospectively after its effective date without assessing preferability under Topic 250, Accounting Changes and
Error Corrections. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.
Other
accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until
a future date are not expected to have a material impact on our consolidated financial statements upon adoption.
GST
Receivable
The
company was subject to a Goods and Services Tax Audit in Papua New Guinea during the financial year, the amounts claimed were confirmed
and we are awaiting refunds to the amount as shown in the Balance Sheet as Other Assets in due course. In the meantime we are offsetting
Goods and Services Tax charged on sales against this amount.
NOTE
3 – INVESTMENTS IN SUBSIDIARIES
The
Company owns interests in the following entities which was recorded at their book value since they were related party common control
acquisitions.
|
|
Investment
|
|
|
Ownership
%
|
|
Aqua Mining (PNG)
|
|
|
34
|
|
|
|
90
|
%
|
As
Aqua Mining (PNG) Ltd was acquired from a related entity, Five Arrows Limited (see Note 10 – Business Combinations), the shares
were recorded in the accounts at their true cost value.
NOTE
4 – PROPERTY AND EQUIPMENT
|
|
September
30, 2020
|
|
|
September
30, 2019
|
|
|
|
|
|
|
|
|
Plant Equipment
|
|
|
113,515
|
|
|
|
89,322
|
|
Motor Vehicle
|
|
|
111,585
|
|
|
|
111,585
|
|
|
|
|
225,100
|
|
|
|
200,907
|
|
Less accumulated depreciation
|
|
|
-97,280
|
|
|
|
-74,786
|
|
Less Provision for Impairment
|
|
|
-127,820
|
|
|
|
-
|
|
—
|
|
$
|
0
|
|
|
$
|
126,121
|
|
Depreciation
expense was approximately $21,823 for the year ended September 30, 2020 and $13,082 for the year ended September 30, 2019.
During
the year ended September 30, 2020, the Aqua Mining business continued to generate material operating losses. Consequently, management
has re-assessed the carrying value of the existing plant and equipment and its ability to generate positive cash flows over the remaining
useful life of the group of assets used within the Timber milling business. Managements current assessment, which takes into consideration
the ongoing uncertain impacts of COVID-19 on market supply chains and the access to equipment required for timber processing facility
enhancements, indicates that the current group of assets are impaired and need to be written down to a carrying value indicative representative
of fair value. Managements current assessment of the carrying value is nil as there is no reliable secondary market at present for these
assets in the Port Moresby region combined with other market constraints relating to COVID-19 impacts on supply chains. Management will
continue to explore opportunities to expand the supply and processing capacity of the timber milling process with a view to re-assessing
the carrying value of the asset group should positive operating cash flows start to be generated in future periods.
NOTE
5 – CONVERTIBLE NOTES PAYABLE
|
|
|
September
30, 2020
|
|
|
|
|
|
Note
Face Amount
|
|
|
|
Debt
Discount
|
|
|
|
Net
Amount
of Note
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Note
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
2012 Note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
2013 Note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
2014 Note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
September
30, 2019
|
|
|
|
Note
Face Amount
|
|
|
Debt
Discount
|
|
|
Net
Amount
of Note
|
|
|
|
|
|
|
|
|
|
|
|
2011 Note
|
|
$
|
22,166
|
|
|
$
|
-
|
|
|
$
|
22,166
|
|
2012 Note
|
|
|
48,000
|
|
|
|
-
|
|
|
|
48,000
|
|
2013 Note
|
|
|
12,000
|
|
|
|
-
|
|
|
|
12,000
|
|
2014 Note
|
|
|
9,000
|
|
|
|
-
|
|
|
|
9,000
|
|
Total
|
|
$
|
91,166
|
|
|
$
|
-
|
|
|
$
|
91,166
|
|
The
company decided to write back the balance of the 2014 Note payable to Firehole Capital Ltd as the company was de-registered during the
financial year.
NOTE
6 – LOAN FROM RELATED PARTY
|
|
September
30, 2019
|
|
|
|
Note
face amount
|
|
|
Debt
Discount
|
|
|
Net
Amount
of note
|
|
|
|
|
|
|
|
|
|
|
|
Loan from
related party
|
|
$
|
1,956,986
|
|
|
$
|
0
|
|
|
$
|
1,956,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,956,986
|
|
|
$
|
0
|
|
|
$
|
1,956,986
|
|
|
|
September
30, 2020
|
|
|
|
Note
face amount
|
|
|
Debt
Discount
|
|
|
Net
Amount
of note
|
|
|
|
|
|
|
|
|
|
|
|
Loan from
related party
|
|
$
|
2,770,739
|
|
|
$
|
0
|
|
|
$
|
2,770,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,770,739
|
|
|
$
|
0
|
|
|
$
|
2,770,739
|
|
On
January 16, 2020, the Company entered into a Promissory Note Consolidation Agreement (the “Consolidation Agreement”) with
one of its noteholders, Warren Sheppard., as lender (“Mr. Sheppard”). Pursuant to the terms of the Consolidation Agreement,
the Company consolidated an aggregate of $1,358,692 of outstanding debt obligations (the “Outstanding Debt”), which included
principal and interest, owed to Mr. Sheppard by the Company.
Upon
the assumption by the Company of the Outstanding Debt, the Company and Mr. Sheppard entered into an unsecured promissory note (the “Consolidated
Note”), which such Consolidated Note restated the repayment terms and conditions of the Outstanding Debt in full. Pursuant to the
terms and conditions of the Consolidated Note, the Outstanding Debt accrues simple interest at 12.5% per year, compounded annually, and
the Consolidated Note has a maturity date of January 15, 2022. No regularly scheduled periodic payments of principal or interest are
due under the Consolidated Note, and, unless there is an earlier event of default, all outstanding and unpaid principal and interest
under the Consolidated Note is due and payable in a single lump sum payment at maturity. The Consolidated Note also removes any common
stock conversion features from previous notes. The Company may prepay the Consolidated Note at any time prior to maturity without penalty.
As
a consequence of the debt consolidation, the derivative Liabilities associated with option component has been eliminated, therefore,
derivative liabilities amounted to $728,080 as of the debt consolidation date are subsequently reversed and charged into profit and losses
in January 2020.
As
at September 30,2020 the Related Party Loans of $2,770,739 comprises Consolidation Note $1,358,692 and an unsecured loan of $1,412,046.
Mr
Sheppard has provided a letter of comfort to the company stating that he will not request repayment of the loan, for a period of not
less than 12 months, from the date of signing the accounts.
NOTE
7 – STOCKHOLDER’S DEFICIT
Common
Stock
On
August 22, 2013, the Company’s Board authorized a 225:1 reverse stock split. All share and per share data in the accompanying financial
statements and footnotes has been adjusted retrospectively for the effects of the stock split.
On
October 12, 2013, the Company issued by director’s resolution, 10,000,000 shares of newly issued common stock for the purchase
of a Memorandum of Understanding (dated September 2, 2013) from a related company (Five Arrows Limited); which gave Kibush Capital Corporation
the right to acquire 80% ownership in Instacash Pty Ltd, an Australian Currency Services provider, and corporate trustee of the Instacash
Trust. As this transaction was with a related party, the value was recorded at the par value of the stock i.e., $0.001 per share of common
stock.
Between
October 23, 2013, and September 30, 2014, the Company issued a total of 3,274,000 shares of common stock upon the requests from convertible
note holders to convert principal totaling $3,274 into the Company’s common stock based on the terms set forth in the loans. The
conversion rate was $0.001.
On
February 28, 2014, the Company issued by director’s resolution, 40,000,000 shares of newly issued common stock to conclude a Assignment
and Bill of Sale (dated February 14, 2014) from a related company (Five Arrows Limited); which gave Kibush Capital Corporation the right
to enter into a Joint Venture contract with the leaseholders of certain Mining Leases in Papua New Guinea. As this transaction was with
a related party, the value was recorded at par value of the stock i.e., $0.001 per share of common stock.
Between
November 1, 2014, and March 31, 2015, the Company issued a total of 4,560,000 shares of common stock upon the requests from convertible
note holders to convert principal totaling $3,274 into the Company’s common stock based on the terms set forth in the loans. The
conversion rate was $0.001.
Between
April 1, 2016, and September 30, 2016, the Company issued a total of 190,114,175 shares of common stock upon the requests from convertible
note holders to convert principal totaling $190,114 into the Company’s common stock based on the terms set forth in the loans.
The conversion rate was $0.001.
Between
October 1, 2016, and December 31, 2016, the Company issued a total of 208,879,614 shares of common stock upon the requests from convertible
note holders to convert principal totaling $208,880 into the Company’s common stock based on the terms set forth in the loans.
The conversion rate was $0.001.
Between
January 1, 2017, and March 31, 2017, the Company issued a total of 9,375,000 shares of common stock upon the requests from convertible
note holders to convert principal totaling $9,375 into the Company’s common stock based on the terms set forth in the loans. The
conversion rate was $0.001.
Between
April 1, 2017, and June 30, 2017, the Company issued a total of 405,000,000 shares of common stock upon the requests from convertible
note holders to convert principal totaling $405,000 into the Company’s common stock based on the terms set forth in the loans.
The conversion rate was $0.001.
On
August 23, 2017, the Company’s Board authorized a 1:25 reverse stock split. All share and per share data in the accompanying financial
statements and footnotes has been adjusted retrospectively for the effects of the stock split.
Between
October 1, 2017, and December 31, 2017, the Company issued a total of 180,395,000 shares of common stock upon the requests from convertible
note holders to convert principal totaling $180,395 into the Company’s common stock based on the terms set forth in the loans.
The conversion rate was $0.001.
Between
January 1, 2018, and March 31, 2018, the Company issued a total of 139,000,000 shares of common stock upon the requests from convertible
note holders to convert principal totaling $139,000 into the Company’s common stock based on the terms set forth in the loans.
The conversion rate was $0.001.
Between
April 1, 2018, and June 30, 2018, the Company issued a total of 120,000,000 shares of common stock upon the requests from convertible
note holders to convert principal totaling $120,000 into the Company’s common stock based on the terms set forth in the loans.
The conversion rate was $0.001.
Preferred
Stock
Preferred
stock includes 50,000,000 shares authorized at $0.001 par value, of which 10,000,000 have been designated Series A and 25,000,000 designated
as Series B. A total of 3,000,000 shares of Series A preferred stock are issued and outstanding as of September 30, 2020, and September
30, 2019. A total of 34,999,899 shares of Series B preferred stock were outstanding as of September 30, 2020, and a total of 101 Series
C Preference Shares are issued and outstanding as of September 30, 2020.
Issued
Preference Share B
On
January 9, 2020, the Board of Directors, with the approval of a majority vote of the shareholders approved the filing of a Certificate
of Amendment of Designation of the Company’s Series B Preferred Stock (“Series B Preferred Stock”). The Board of Directors
authorized the increase of authorized shares of the Series B Preferred Stock to 37,999,899 shares by filing the Certificate of Amendment
of Designation with the Nevada Secretary of State. The terms of the Certificate of Amendment of Designation of the Series B Preferred
Stock, which was filed and approved by the State of Nevada on January 9, 2020, have not otherwise changed as previously filed and disclosed.
Issued
Preference Share C
On
January 9, 2020, the Board of Directors, with the approval of a majority vote of the shareholders approved the filing of a Certificate
of Amendment of Designation of the Company’s Series C Preferred Stock (“Series C Preferred Stock”). The Board of Directors
authorized the increase of authorized shares of the Series C Preferred Stock to 101 shares by filing the Certificate of Amendment of
Designation with the Nevada Secretary of State. The terms of the Certificate of Amendment of Designation of the Series C Preferred Stock,
which was filed and approved by the State of Nevada on January 9, 2020, have not otherwise changed as previously filed and disclosed.
NOTE
8 – INCOME TAXES
The
provision/(benefit) for income taxes for the year ended September 30, 2020, and 2019 was as follows (assuming a 15% effective tax rate)
|
|
September
30, 2020
|
|
|
September
30, 2019
|
|
Current Tax Provision
|
|
|
|
|
|
|
|
|
Federal-
|
|
|
|
|
|
|
|
|
Taxable Income
|
|
|
-
|
|
|
|
-
|
|
Total current tax provisions
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Provision
|
|
|
|
|
|
|
|
|
Federal-
|
|
|
|
|
|
|
|
|
Loss carry forwards
|
|
$
|
-
|
|
|
$
|
-
|
|
Change in valuation
allowance
|
|
$
|
-
|
|
|
$
|
-
|
|
Total deferred tax provisions
|
|
$
|
-
|
|
|
$
|
-
|
|
As
of September 30, 2020, the Company had approximately $13,472,301 in tax loss carry forwards that can be utilized future periods to reduce
taxable income, and the carry forward incurred for the year ended September 30, 2020, will expire by the year 2035.
The
Company did not identify any material uncertain tax positions. The Company did not recognize any interest or penalties for unrecognized
tax benefits.
The
federal income tax returns of the Corporation are subject to examination by the IRS, generally for three years after they are filed.
NOTE
9 – RELATED PARTY TRANSACTIONS
Details
of transactions between the Corporation and related parties are disclosed below.
The
following transactions were carried out with related parties:
|
|
September
30, 2020
|
|
|
September
30, 2019
|
|
|
|
|
|
|
|
|
Loan from
related party
|
|
$
|
2,770,739
|
|
|
$
|
1,956,986
|
|
Convertible Loans (B)
|
|
$
|
-
|
|
|
$
|
91,166
|
|
Total
|
|
$
|
2,770,739
|
|
|
$
|
2,048,152
|
|
(a)
From time to time, the president and stockholder of the Company provides advances to the Company for its working capital purposes. These
advances bear no interest and are due on demand.
(b)
See Note 6 for details of Convertible notes.
(c)
On January 9th, 2020, the Company issued Mr Sheppard 14,999,899 Class B Preference Shares and 101 Class C Preference Shares in full satisfaction
of his unpaid 2015 and 2016 Salary of $250,000.
Executive
Employment
On
February 10, 2020, Kibush Capital Corp., a Nevada corporation (the “Company”) entered into an Employment Agreement (the “Agreement”)
with Warren Sheppard (“Mr. Sheppard”) an individual. Pursuant to the terms and conditions of the Agreement, Mr. Sheppard
shall continue to serve as the Company’s President, Chief Executive Officer, Chief Financial Officer, Principal Financial Officer
and a member of the Board of Directors and shall assume such other positions as reasonably requested by the Board of Directors, commencing
on January 1, 2020 for a term of Four (4) years, and shall have the option to be renewed for an additional one (1) year unless earlier
terminated. In exchange for his services, Mr. Sheppard shall receive a yearly salary of $24,000.
NOTE
10 – BUSINESS COMBINATIONS
Set
out below are the controlled and non-controlled members of the group as of September 30, 2020, which, in the opinion of the directors,
are material to the group. The subsidiaries as listed below have share capital consisting solely of ordinary shares, which are held directly
by the Company; the country of incorporation is also their principal place of business.
Name
of Entity
|
|
Country
of Incorporation
|
|
Acquisition
Date
|
|
Voting
Equity Interests
|
|
Aqua Mining (PNG) Ltd
|
|
Papua New Guinea
|
|
28-Feb-2014
|
|
|
90
|
%
|
NOTE
11 – LEGAL PROCEEDINGS
We
are not presently a party to any litigation.
NOTE
12 - CONTINGENT LIABILITIES
None.
NOTE
13 – SUBSEQUENT EVENTS
COVID-19
pandemic
The
COVID-19 pandemic announced by the World Health Organisation post 31 January 2020 is having negative impact on the world economy. We
have witnessed unprecedented measures implemented by the government on strict border security requirements. It is likely to have a significant
impact on the Company’s export sales and associated supply chains. However, at this point of time, the impact of COVID-19 is unknown
and cannot be quantified. We expect our business to remain in operation but will manage the unavoidable disruptions to our best abilities.
S-1
Registered Shares Issued.
Under
the terms and conditions of the S-1 effective as from August 7th 2019, Shares issued and Amounts raised as below.
Date
|
|
Shares
Subscribed
|
|
|
|
|
|
Proceeds
$
|
|
January 6 2021
|
|
|
22,123,392
|
|
|
|
0.0015
|
|
|
|
33185
|
|
February 10 2021
|
|
|
23,237,347
|
|
|
|
0.0015
|
|
|
|
34856
|
|
March 17 2021
|
|
|
48,381,823
|
|
|
|
0.0015
|
|
|
|
72573
|
|
April 12 2021
|
|
|
50,000,000
|
|
|
|
0.0015
|
|
|
|
75000
|
|
May 18 2021
|
|
|
50,000,000
|
|
|
|
0.0015
|
|
|
|
75000
|
|
July 5 2021
|
|
|
50,000,000
|
|
|
|
0.0015
|
|
|
|
75000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243,742,562
|
|
|
|
|
|
|
|
365614
|
|
NOTE
14 – INVENTORY
Inventories
are valued at cost. Cost is determined using the first-in, first-out method. The cost of finished goods and work-in-progress comprises
raw materials, direct labour, other direct costs, and related production overheads (based on normal operating capacity) but excludes
borrowing costs. There are three types of inventories in three stages of completion. Raw materials comprise of logs that are on the ground
and at the log pond; Work-in-progress comprise of rough sawn timber at the Rigo site whilst Finished goods are planed, straightened timber
at Laloki for sale. Each would have a different wholesale value depending on the level of processing. The stock levels held as raw materials
and finished goods are minimal, and the saleable condition of the finished timber is questionable and unable to be accurately valued
therefore we have written stock down to nil net realizable value.
Increase
in Authorized Shares.
The
Corporation has filed with the Nevada Secretary of State a resolution that the Corporation be and hereby is authorized to increase its
authorized shares to Two Billion (2,000,000,000) shares of common stock authorized and Fifty Million (50,000,000) shares of preferred
authorized, the Board of Directors consented to this filing February 19, 2020, at the date of this Report the Corporation has not yet
received confirmation from Nevada Secretary of State.