XERI Xeriant Inc (QB)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS

Xeriant, Inc. (“Xeriant,” formerly known as “Banjo & Matilda, Inc.,” “Banjo,” “BANJ”) is a holding and operating company focused on acquiring, developing and commercializing technologies with applications in aerospace, including innovative aircraft concepts. The Company is located at the Research Park at Florida Atlantic University in Boca Raton, Florida.

The Company was originally incorporated in Nevada on December 18, 2009 under the name Eastern World Group, Inc. The name changed to Banjo & Matilda, Inc. on September 24, 2013. Effective June 22, 2020 the Company changed its name from Banjo & Matilda, Inc. to Xeriant, Inc.

On November 14, 2013, Eastern World Group, Inc. entered into a share exchange agreement (the “Exchange Agreement”) with Banjo & Matilda Pty Ltd, (“Banjo & Matilda”) and the shareholders of Banjo & Matilda (“B&M Shareholders”). Pursuant to the Exchange Agreement, 100% of the issued and outstanding capital stock of Banjo & Matilda was acquired, making it a wholly-owned subsidiary. In consideration for the purchase of 100% of the issued and outstanding capital stock of Xeriant, Inc. (f/k/a Banjo & Matilda) under the Exchange Agreement, the Company issued B&M Shareholders an aggregate of 24,338,872 restricted shares of common stock of the Company.

On July 1, 2015, the operations of Banjo & Matilda Pty Ltd were transferred to Banjo & Matilda (Australia) Pty Ltd., a wholly owned subsidiary of Xeriant, Inc. (f/k/a Banjo & Matilda).

Following the worldwide downturn of the retail clothing business model, in June of 2017, Xeriant (f/k/a Banjo) began to seek out additional businesses to acquire as subsidiaries to expand and refocus its operations to generate more revenue and profit. In June of 2017, Xeriant (f/k/a Banjo) began to seek out companies to acquire as additional subsidiaries to expand its business lines and generate more revenue and profit.

On September 20, 2017, Xeriant (f/k/a Banjo) entered into a Memorandum of Understanding for the acquisition of Spectrum King, LLC as a wholly-owned subsidiary, a pioneer of full spectrum LED grow lights, specialized in designing, manufacturing and selling high-end LED grow lights for indoor/greenhouse applications with both the Agriculture and Horticulture industries.

On March 19, 2018, Banjo entered into a Share Exchange Agreement with Spectrum King, LLC, however this transaction failed to close.

On April 16, 2019, Xeriant (f/k/a Banjo) entered into a Share Exchange Agreement with American Aviation Technologies, LLC (“AAT”), an aircraft design and development company focused on the emerging segment of the aviation industry of autonomous and semi-autonomous vertical take-off and landing (VTOL) unmanned aerial vehicles (UAVs).

On June 28, 2019, Xeriant (f/k/a Banjo) spun out two wholly-owned subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD.

On September 30, 2019, the acquisition of AAT closed and AAT became a wholly-owned subsidiary of Xeriant, Inc. (f/k/a Banjo & Matilda, Inc.). On June 22, 2020, the name was changed from Banjo & Matilda, Inc. to Xeriant, Inc. The Company will be referred to as “Xeriant, Inc.” and or “Xeriant” throughout the document.

Xeriant is a holding and operating company focused on acquiring, developing and commercializing revolutionary, eco-friendly technologies with applications in aerospace. These include innovative aircraft concepts targeting emerging opportunities within the aviation industry. The Company plans to take an active and disruptive role in the “third wave of aeronautics,” which includes the electrification of aerial transport and the development and integration of specialized aircraft with greatly reduced logistical footprints — allowing them to safely take-off and land significantly closer to (and even on top of) buildings. This will facilitate point-to-point on-demand and scheduled short-haul flights in congested urban environments, called urban air mobility (UAM).

Advancements in structural design, propulsion systems, materials, sensors, artificial intelligence (AI), batteries and high-speed connectivity have dramatically enhanced energy efficiency, acoustics, emissions, safety and autonomy, making feasible a broad range of electrically-powered VTOL (vertical takeoff and landing) capable aircraft, and transitioning aviation into a new era. Many of Xeriant’s “nextologies” will make personal air travel (for 1-4 passengers) far more affordable — providing safe, practical alternatives to traditional means of travel in a post-pandemic world.

Xeriant intends to acquire strategic interests in the most promising of these technological breakthroughs and next-generation aircraft configurations, leveraging the collective expertise of its growing international network of industry partnerships to accelerate the development of economically viable products that address specific market demands. The Company will identify prospective synergies between complementary and related technologies under its umbrella and promote constructive interaction and collaboration.

The Company is an OTC Markets publicly company trading under the stock symbol, XERI. As a holding company, Xeriant is positioned to own a portfolio of assets in a number of entities at various stages of maturity, including well-established revenue-generating enterprises. At this time, the Company is in active negotiations with several parties and performing due diligence.

The holding and operating company structure has several advantages and will enable the Company to grow rapidly, acquiring its assets primarily through acquisitions, joint ventures, strategic investments and licensing arrangements. As a publicly-traded holding company, Xeriant offers its subsidiary such benefits as providing shareholder liquidity, improved access to capital, higher valuations and lower risk through the shared ownership of a diversified portfolio, while at the same time allowing these entities to maintain independence in their distinct operations to focus on their fields of expertise. Cost savings and efficiencies may be realized from sharing non-operational functions such as finance, legal, tax, marketing, human resources, purchasing power, as well as investor and public relations. In addition, leveraging the breadth of resources in a holding company structure provides increased access to financial markets with more favorable terms, allowing for the ability to invest in large-scale projects. Xeriant is selecting investments and acquisitions based on the potential impact of a company’s technology, the strength of its patents and other IP, the quality of its management team, and a demonstrated commitment to its vision with a clear path to profitability.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the unaudited consolidated condensed financial statements have been included. Such adjustments are of a normal, recurring nature. The unaudited condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. These financial statements should be read in conjunction with the company’s latest annual financial statements.

Principles of Consolidation

The condensed consolidated unaudited financial statements include the accounts of Xeriant, Inc. and its wholly owned subsidiary American Aviation Technologies, LLC, collectively referred to as the Company. All material intercompany accounts, transactions and profits were eliminated in consolidation. These financial statements should be read in conjunction with the company’s latest annual financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of beneficial conversion features and warrants associated with convertible debt. Actual results could differ from these estimates.

Fair Value Measurements and Fair Value of Financial Instruments

The Company adopted ASC Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2: Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3: Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The estimated fair value of certain financial instruments, including all current liabilities are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Deferred Taxes

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial. As of September 30, 2020 there are no deferred tax assets.

Cash and Cash Equivalents

For purposes of the Statements of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company has no cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. The allowance for doubtful accounts is created by forming a credit balance which is deducted from the total receivables balance in the balance sheet. As of September 30, 2020 and June 30, 2019 there are no accounts receivable.

Revenue Recognition

Revenue includes product sales. The Company recognizes revenue from product sales in accordance with Topic 606 “Revenue Recognition in Financial Statements” which considers revenue realized or realizable and earned when all of the following criteria are met:

For the three months ended September 30, 2020 and 2019, the Company had no revenue.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Convertible Debentures

If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense, over the life of the debt. During the three months ended September 30, 2020, the Company recorded a BCF in the amount of $42,893.

Fair Value of Financial Instruments

Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

The Company follows Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”), which permits entities to choose to measure many financial instruments and certain other items at fair value.

Research and Development Expenses

Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $0 and $6,339 for the three months ended September 30, 2020 and 2019, respectively.

Advertising, Marketing and Public Relations

The Company expenses advertising and marketing costs as they are incurred. There were no advertising costs during the three months ended September 30, 2020 and 2019.

Offering Costs

Costs incurred in connection with raising capital by the issuance of common stock are recorded as contra equity and deducted from the capital raised. There were no offering costs during the three months ended September 30, 2020 and 2019.

Income Taxes

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of general and administrative expenses. Our consolidated federal tax return and any state tax returns are not currently under examination.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually from differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, issued as a new Topic, ASC Topic 606. The new revenue recognition standard supersedes all existing revenue recognition guidance. Under this ASU, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14, issued in August 2015, deferred the effective date of ASU 2014-09 to the first quarter of 2018, with early adoption permitted in the first quarter of 2017.

In February 2016, FASB issued ASC 842 that requires lessees to recognize lease assets and corresponding lease liabilities on the balance sheet for all leases with terms of more than 12 months. The update, which supersedes existing lease guidance, will continue to classify leases as either finance or operating, with the classification determining the pattern of expense recognition in the income statement.

The ASU will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted, and is applicable on a modified retrospective basis with various optional practical expedients. The Company has assessed the impact of this standard. The Company entered into a new lease agreement commencing on November 1, 2019 and implemented this guidance on November 1, 2019.

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.

On June 20, 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after this date. The Company adopted ASU 2018-07 on August 6, 2018. The adoption of this standard did not have a material impact on the financial statements.

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

NOTE 3 – OPERATING LEASE RIGHT-OF-USE ASSET AND OPERATING LEASE LIABILITY

The Company leases 2,911 square feet of office space located at Innovation Centre No. 1, 3998 FAU Boulevard, Boca Raton, Florida. The Company entered into a lease agreement commencing on November 1, 2019 through January 1, 2025 in which the first three months of rent are abated. The following table illustrates the base rent amounts over the term of the lease:

Operating lease right-of-use asset and liability are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of our leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. Since the common area maintenance expenses are expenses that do not depend on an index or rate, they are excluded from the measurement of the lease liability and recognized in other general and administrative expenses on the statements of operations. At inception the Company paid prepaid rent in the amount of $4,659, which was netted against the operating lease right-of-use asset balance until it was applied in February 2020.

Right-of-use asset is summarized below:

NOTE 4 – EXCHANGE AGREEMENT

On April 18, 2019, Xeriant, Inc. (f/k/a Banjo & Matilda, Inc.), and American Aviation Technologies, LLC entered into a Share Exchange Agreement (“Agreement”). The agreement, which was effective on September 30, 2019, was pursuant to which Banjo acquired 100% of our issued and outstanding membership units in exchange for the issuance of Banjo shares of its Series A Preferred Stock constituting 86.39% of the total voting power of Banjo capital stock to be outstanding upon closing, after giving effect to the consummation of concurrent debt settlement and other capital stock issuances but before the issuance of shares of capital stock for investor relations purposes. As a result of the Exchange Agreement, the Company became a wholly owned subsidiary of Banjo.

The Exchange Agreement was subject to the satisfaction of certain conditions as set forth in the Exchange Agreement.

Consummation of the Exchange Agreement was effective on September 30, 2019. Pursuant to the Exchange Agreement, the members of AAT received 2,750,000 shares of the Banjo & Matilda, Inc.’s Series A Preferred Stock to the members of AAT in exchange for the 10,000,000 member units.

On September 30, 2019 just prior to the exchange, Banjo issued 170,000 shares of preferred stock as compensation and 193,637 shares of preferred stock in satisfaction of $2,608,224 in liabilities.

NOTE 5 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

Notes issued between September 27, 2019 and July 20, 2020

Between September 27, 2019 and July 20, 2020, AAT issued convertible notes payable with an aggregate face value of $357,750 with a coupon rate of 6%. The notes have a maturity date of six months. The agreements provided that in the event AAT is merged into Banjo (“Company”), at any time prior to the Maturity Date, the holder has the option to convert the principal balance and any accrued interest to common stock of the Company at a conversion price of $.0033 per share. In the event the holder does not elect to convert the note prior to maturity, the note will automatically convert to common stock at a price of $.0033 per share.

The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification. However, the Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance. The Company recorded a beneficial conversion feature in the amount of $357,750 related to these notes.

Between March 27, 2020 and September 10, 2020, holders of the convertible notes converted $340,950 in principal and $10,231 in accrued interest into 106,418,414 shares of common stock. As of September 30, 2020, 90,919,829 shares have been issued. The remaining 15,498,585 is recorded in common stock to be issued.

Notes issued between August 10, 2020 and September 24, 2020

Between August 10, 2020 and September 24, 2020, the Company issued convertible notes payable with an aggregate face value of $74,000 with a coupon rate of 6%. The notes have a maturity date of three months. The agreements provided the holder has the option to convert the principal balance and any accrued interest to common stock of the Company at a conversion price of $.025 per share. In the event the holder does not elect to convert the note prior to maturity, the note will automatically convert to common stock at a price of $.025 per share.

The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification.

In connection with the notes, the Company issued warrants indexed to an aggregate 2,960,000 shares of common stock. The warrants have a term of three years and an exercise price of $.025. The Company evaluated the warrants under ASC 815 Derivatives and Hedging (“ASC 815”) and determined that they did not require liability classification. The warrants were recorded in additional paid-in capital under their aggregate relative fair value of $36,407.

The Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance. After the allocation of $36,407 to the warrants, the remaining $37,593 in proceeds resulted in a beneficial conversion feature recorded in additional paid-in capital. Both the BCF and warrants resulted in a debt discount and are amortized over the life of the note.

Amortization of debt discount and interest expense related to all notes

For the three months ended September 30, 2020, the Company recorded $45,961 and $0 in amortization of debt discount related to the notes. For the three months ended September 30, 2020 and 2019, the Company recorded $1,087 and $1,202 in interest expense related to the notes, respectively.

NOTE 6 –RELATED PARTY TRANSACTIONS

During the three months ended September 30, 2020, the Company paid Ancient Investments, LLC, a Company owned by the Company’s CEO, Keith Duffy and the Company’s Executive Director of Corporate Operations, Scott Duffy, $15,500 for consulting services.

During the three months ended September 30, 2020, the Company paid AMP Web Services, a Company owned by the Company’s CTO, Pablo Lavigna, $4,500 for consulting services. On August 26, 2020, the Company issued 4,090,909 shares of common stock for payment of $13,500 for services performed in May, June and July 2020. As of September 30, 2020, $4,500 due for September services is recorded in accrued liabilities, related party.

During the three months ended September 30, 2020, the Company owed $7,500 to Keystone Business Development Partners, a Company owned by the Company’s CFO, Brian Carey. The amount owed is recorded in accrued liabilities, related party.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. As of September 30, 2020, the Company is not aware of any contingent liabilities that should be reflected in the financial statements.

NOTE 8 – EQUITY

Common Stock

During the three months ended September 30, 2020, the Company issued 112,847,466 shares of common stock for the conversion of $359,300 in principal and $13,097 in accrued interest.

On August 26, 2020, the Company issued 4,090,909 shares of common stock for payment of $13,500 for services performed in May, June and July 2020. The shares were valued at $200,454 or $0.049 per share. As of result the Company recorded a loss on settlement in debt in the amount of $186,954.

During the three months ended September 30, 2020, certain holders of preferred stock converted 39,358 shares into 39,358,000 shares of common stock.

Preferred Stock

There are 100,000,000 shares authorized as preferred stock, of which 3,500,000 are designated as Series A Preferred Stock having a par value of $0.00001 per share. The Series A preferred stock has the following rights:

During the three months ended September 30, 2020, certain holders of preferred stock converted 39,358 shares into 39,358,000 shares of common stock.

As of September 30, 2020 and June 30, 2020, the Company has 3,074,279 and 3,113,637 shares of Series A Preferred Stock issued and outstanding, respectively. The balance of Preferred Stock at September 30, 2020 and June 30, 2020 was $31.

NOTE 9 – GOING CONCERN MATTERS

The Company’s financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. At September 30, 2020 and June 30, 2020, the Company had $42,058 and $38,893 in cash and $50,799 and $53,532 in negative working capital, respectively. For the three months ended September 30, 2020 and 2019, the Company had a net loss of $327,072 and $19,165, respectively. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The 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 be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.