Notes to Financial Statements
June 30, 2020
NOTE 1 – NATURE OF BUSINESS
Star
Alliance International Corp. (“the Company”, “we”, “us”) was originally incorporated with the
name Asteriko Corp. in the State of Nevada on April 17, 2014 under the laws of the State of Nevada, for the purpose of acquiring
and developing gold mining as well as certain other mining properties worldwide.
NOTE 2 – SIGNIFICANT AND CRITICAL
ACCOUNTING POLICIES AND PRACTICES
Basis of Presentation
The accompanying financial statements of
the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) and the rules of the Securities and Exchange Commission (“SEC”).
Use of Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles 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. Actual results could differ from those estimates.
Cash equivalents
The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the
years ended June 30, 2020 or 2019.
Long Lived Assets
Property consists of mining equipment not
yet used. Our company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. When we determine that the carrying value of long-lived assets may not be recoverable based
upon the existence of one or more indicators of impairment and the carrying value of the asset cannot be recovered from projected
undiscounted cash flows, we record an impairment charge. Our company measures any impairment based on a projected discounted cash
flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model.
Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.
Stock-based Compensation
The Company records stock-based compensation
in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation.” FASB ASC Topic 718 requires
companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the
expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date
fair value of stock options and other equity-based compensation issued to employees and non-employees. The Company accounts for
stock-based compensation in accordance with the provision of ASC 505-50, Equity Based Payments to Non-Employees, which requires
that such equity instruments are recorded at their fair value on the measurement date. The measurement of stock-based compensation
is subject to periodic adjustment as the underlying equity instruments vest.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted
in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency
and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy
which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value
hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described
below:
Level 1 - Quoted market prices available
in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs include quoted prices
for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that
are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves,
etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market
corroborated inputs).
Level 3 - Unobservable inputs that reflect
our assumptions about the assumptions that market participants would use in pricing the asset or liability.
The Company’s financial instruments
are consisted principally of accrued expenses and short term debt. The carrying amounts of such financial instruments in the accompanying
balance sheets approximate their fair values due to their relatively short-term nature.
Net income (loss) per common share
Net loss per common share is computed pursuant
to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per common share is computed by dividing net
loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share
is computed by dividing net loss by the weighted average number of shares of common stock and potentially dilutive outstanding
shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through
contingent share arrangements, stock options and warrants. The diluted loss per share is the same as the basic loss per share for
the years ended July 31, 2020 and 2019, as the inclusion of any potential shares would have had an antidilutive effect due to our
loss from operations.
Recently Issued Accounting Pronouncements
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, and also issued subsequent amendments to the initial
guidance, ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-11 (collectively, Topic 326), to introduce a new impairment model
for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (CECL). Under Topic
326, an entity is required to estimate CECL on available-for-sale (AFS) debt securities only when the fair value is below the amortized
cost of the asset and is no longer based on an impairment being “other-than-temporary”. Topic 326 also requires the
impairment calculation on an individual security level and requires an entity use present value of cash flows when estimating the
CECL. The credit-related losses are required to be recognized through earnings and non-credit related losses are reported in other
comprehensive income. In April 2019, the FASB further clarified the scope of Topic 326 and addressed issues related to accrued
interest receivable balances, recoveries, variable interest rates and prepayment. The new guidance will require modified retrospective
application to all outstanding instruments, with a cumulative effect adjustment recorded to opening retained earnings as of the
beginning of the first period in which the guidance becomes effective. The amendments in this Update for the Company are
effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption
is permitted in any interim period after the issuance of this of this Update. The Company is evaluating the impact of the adoption
of the new standard on its financial statement and disclosures.
In August 2018,
the FASB issued ASU 2018-13 to improve the effectiveness of disclosures about fair value measurements required under ASC 820.
The ASU modifies the disclosure objective paragraphs of ASC 820 to eliminate (1) “at a minimum” from the phrase
“an entity shall disclose at a minimum” and (2) other similar “open ended” disclosure requirements
to promote the appropriate exercise of discretion by entities. The disclosure objective added in ASC 820-10-50-1C states:
The objective of the disclosure requirements in this Subtopic is to provide users of financial statements with information
about assets and liabilities measured at fair value in the statement of financial position or disclosed in the notes to financial
statements: a) the valuation techniques and inputs that a reporting entity uses to arrive at its measures of fair value, including
judgments and assumptions that the entity makes, b) the uncertainty in the fair value measurements as of the reporting date, and
c) how changes in fair value measurements affect an entity’s performance and cash flows. The new ASU is effective for all
entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is
permitted.
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the 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 – GOING CONCERN
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization
of assets, and liquidation of liabilities in the normal course of business. As shown in the accompanying financial statements,
the Company has an accumulated deficit of $2,669,774 and negative working capital of $178,985 as of June 30, 2020. For the year
ended June 30, 2020 the Company had a net loss of $1,894,320 (includes $1,425,840 of non-cash stock compensation expense and a
$118,000 loss on conversion of accrued salary), with $135,591 of cash used in operating activities. Due to these conditions, it
raises substantial doubt about the Company’s ability to continue as a going concern.
The Company is
attempting to commence operations and generate sufficient revenue; however, the Company’s cash position may not be sufficient
to support its daily operations. While the Company believes in the viability of its strategy to commence operations and generate
sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the
Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient
revenue and its ability to raise additional funds. The financial statements do not include any adjustments relating to the recoverability
and classification of asset carrying amounts or the amount and classification of liabilities that may result should the Company
be unable to continue as a going concern.
On
January 30, 2020, the World Health Organization declared the coronavirus outbreak a "Public Health Emergency of International
Concern" and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of
the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public
places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse
impact on the economies and financial markets of many countries, including the geographical area in which the Company plans to
operate.
NOTE
4 – ACQUISITION
On
August 13, 2019, The Company closed an Asset Purchase Agreement (the “APA”) with Troy Mining Corporation (“Troy”).
Under the APA, the company acquired 78 gold mining claims consisting of approximately 4,800 acres, located east/southeast of El
Portal, California, in Mariposa County, together with all of Troy’s rights to related equipment and buildings currently located
on the mining claims. In exchange for the mining claims and related assets, the company agreed to issue 1,833,000 shares
of a new class of preferred stock designated Series B Preferred Stock; and agreed to make total cash payments in the amount of
$500,000 under a Promissory Note (the “Purchase Note”).
Under the Purchase Note, we paid $50,000
at the time of the closing, and are required to pay an additional $50,000 within sixty days of the closing, and $25,000 every other
month thereafter, with the entire remaining amount due no later than March 31, 2020. In the event of default under the Purchase
Note, all assets acquired under the APA will be forfeited back to Troy. We are current on all the terms of the agreement.
On October 9, 2019, a contract extension
was agreed between Star Alliance International Corp. and Troy Mining Corporation. The agreement gives the Company 150 days to file
an S-1 registration statement and obtain approval for the shares that are to be issued to the Troy shareholders to become free
trading. The S1 registration was filed on August 14, 2020.
As of June 30, 2020, the Company has paid
$115,000 on the note. The balance as of June 30, 2020, is $385,000.
NOTE 5 – RELATED PARTY TRANSACTIONS
In June 2018, Richard Carey, the Company’s
Chairman, advanced the Company $300 to open a bank account. During the year ended June 30, 2019, Mr. Carey advanced the Company
an additional $72,085, of which $34,005 was repaid. On June 12, 2019, Mr. Carey converted $48,000 of the amount due to him into
48,000,000 shares of common stock. The stock was fair valued at $0.002 per share by an independent valuation firm resulting in
a loss on conversion of $48,000.
As of June 30, 2020, and June 30, 2019,
the balance due to Mr. Carey is $0 and $3,980, respectively. The advances are unsecured, non-interest bearing and due on demand.
As of June 30, 2020, the Company owes Anthony
Anish, a board member, $1,976 for expense reimbursement.
On August 1, 2019, employment agreements
for Richard Carey, John Baird and Anthony Anish were signed providing for annual salaries of $120,000 per annum for Richard Carey
and $60,000 for John Baird and Anthony Anish. As of June 30, 2020, the Company has accrued compensation due to Mr. Carey of $46,360,
Mr. Baird of $55,000 and Mr. Anish of $43,000.
Mr. Carey is using his personal office
space at no cost to the Company.
During the year ended June 30, 2020, the
Company granted 4,000,000 shares of common stock to an officer and two directors for services rendered. The shares were valued
at $0.002 per share for total non-cash expense of $8,000.
During the year ended June 30, 2020, the
Company granted 2,500,000 shares of common stock to directors for services rendered. The shares were valued at $0.168 per share
for total non-cash expense of $420,000.
During the year ended June 30, 2020, the
CEO converted $50,000 of accrued compensation into 1,000,000 shares of common stock. The shares were valued at $0.168. The Company
recognized a $118,000 loss on the conversion.
During the year ended June 30, 2020, the
Company granted 2,000,000 shares of common stock to the brother of the CEO for services rendered. The shares were valued at $0.168
per share for total non-cash expense of $336,000.
During the year ended June 30, 2020, the
Company granted 1,000,000 shares of common stock to the brother of the former CFO for services rendered. The shares were valued
at $0.168 per share for total non-cash expense of $168,000.
NOTE 6 – NOTE PAYABLE
As of June 30, 2020 and 2019, the Company
owed Kok Chee Lee, the former CEO and Director of the Company, $42,651 and $42,651, respectively for operating expenses he paid
on behalf of the Company during the year ended June 30, 2018. The borrowing is unsecured, non-interest-bearing and due on demand.
On June 1, 2018, the Company executed a
promissory note in the amount of $32,000 with the former Secretary of the Board for $30,128 of accrued expenses for services previously
provided and an additional $1,872 for services rendered. The note is unsecured, bears interest at 5% per annum and matures on December
1, 2018. As of June 30, 2020 and 2019, there is $3,336 and $1,732, respectively, of accrued interest due on the note. The note
is past due and in default.
On
October 15, 2018, the Company executed a promissory note for $20,000, for amounts previously accrued and payable to the Company’s
former attorney. The note bears interest at 8% and is due on October 15, 2019. As of and June
30, 2020 and 2019, there is $15,300 and $2,570 and $20,000 and $1,131, respectively, of
principal and accrued interest due on the note.
On June 11, 2019, the company executed
a promissory note with Troy for $500,000 (Note 4). The Company paid the initial $50,000 due on the note on August 13, 2019 and
$35,000 as of December 31, 2019. As of June 30, 2020 there is $385,000 due on this note.
In order to pay the initial $50,000 required
under the APA and the Purchase Note, the Company obtained funding under a Convertible Promissory Note in the amount of $50,000
issued to a private investor. The Convertible Promissory Note accrues interest at an annual rate of 10% and is due and payable
in full in 60 days. On October 7, 2019, a new $250,000 Convertible Promissory Note with initial funding of $50,000 was issued to
the same investor. The Convertible Promissory Note accrues interest at an annual rate of 10% and is due and payable in full in
60 days. The Convertible Promissory Note is convertible to shares of our common stock at a price of $0.05 per share. The investor
has converted the $50,000 and $50,000 from Q1 into 2,260,000 shares of common stock.
During the year ended June 30, 2020, the
Company received a total of $79,000 in other loans from two individuals. These loans accrue interest at 10% and are due on demand.
On February 28, 2020, one of the individuals converted $35,000 and $796 of principal and interest, respectively, into 2,000,000
shares of common stock. On June 29, 2020, the individuals converted $19,000 of principal into 500,000 shares of common stock. The
company recognized a $6,000 loss on the conversion. Accrued interest on the remaining $25,000 as of June 30, 2020 is $1,150.
NOTE 7 – PREFERRED STOCK
Of the 25,000,000 shares of the Company's
authorized Preferred Stock, $0.001 par value per share, 1,900,000 are designated as Series B Preferred Stock. Only one person or
entity, is entitled to be designated as the owner of all of the Series B Preferred Stock (the “Holder”), in whose name
the initial certificates representing the Series B Preferred Stock shall be issued. Any transfer of the Series B Preferred Stock
to a different Holder must be approved in advance by the Corporation; provided, however, the Holder shall have the right to transfer
the Series B Preferred Stock, or any portion thereof, to any affiliate of Holder or nominee of Holder, without the approval of
the Corporation. Each share of Preferred Stock shall have one vote per share. Holder is not entitled to dividends or distributions
and each share of Series B Preferred Stock shall be convertible at the rate of two Common Shares for each one B Preferred stock.
In conjunction with the APA with Troy,
the company issued 1,833,000 shares of Series B Preferred Stock, the shares were valued at $0.002 or $7,532 as if they had been
converted into 3,666,000 shares of common stock.
On October 9, 2019, the parties have agreed
to extend the date for filing the registration statement relating to the preferred shares of the Company to be issued to the Troy
shareholders and that would in turn extend the date that the shares would become free trading. This extension will be for 150 days
for filing the registration statement and obtaining approval for the shares to become free trading. All the remaining terms included
in the contract will remain the same.
NOTE 8 – COMMON STOCK
During the year ended June 30, 2020, the
Company granted 1,640,000 shares of common stock for services. The shares were valued at $0.002 per share for total non-cash expense
of $3,280.
During the year ended June 30, 2020, the
Company granted 2,960,000 shares of common stock for services. The shares were valued at $0.168 per share for total non-cash expense
of $490,560.
During the year ended June 30, 2020, the
Company sold 6,053,331 shares of common stock for total cash proceeds of $186,632. In addition, the Company issued 1,000,000 shares
of common stock that had been purchased in the prior period. Refer to Note 6 for additional shares issued under a convertible promissory
note.
During the year ended June 30, 2020, the
Company issued 2,750,000 shares of common stock in conversion of a $35,250 and $769 of principal and interest, respectively.
Refer to Note 5 for stock issuances to related parties.
NOTE 9 – INCOME TAX
Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry
forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax
Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date
of enactment. The U.S. federal income tax rate of 21% is being used due to the new tax law recently enacted.
Net deferred tax assets consist of the
following components as of June 30:
|
|
|
2020
|
|
|
2019
|
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
|
NOL Carryover
|
|
$
|
560,650
|
|
|
$
|
152,765
|
|
|
Less valuation allowance
|
|
|
(560,650
|
)
|
|
|
(152,765
|
)
|
|
Net deferred tax assets
|
|
$
|
–
|
|
|
$
|
–
|
|
At June 30, 2020, the Company had net operating
loss carry forwards of approximately $560,650 that may be offset against future taxable income. No tax benefit has been
reported in the June 30, 2020 or 2019 financial statements since the potential tax benefit is offset by a valuation allowance of
the same amount.
On December 22, 2017, the U.S. government
enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act
establishes new tax laws that affects 2018 and future years, including a reduction in the U.S. federal corporate income tax rate
to 21% effective January 1, 2018.
Due to the change in ownership provisions
of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes are subject to annual
limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
ASC Topic 740 provides guidance on the
accounting for uncertainty in income taxes recognized in a company’s financial statements. Topic 740 requires a company to
determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits
of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount
to recognize in the financial statements.
The Company includes interest and penalties
arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of June 30,
2020, the Company had no accrued interest or penalties related to uncertain tax positions.
With few exceptions, the Company is no
longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2014.
NOTE 10 – SUBSEQUENT EVENTS
Management has evaluated subsequent events
pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statements were available
to be issued and has determined that the following material events have occurred.
1. On August 12, 2020, John Baird resigned
his positions as Chief Financial Officer, Joint Chairman and a Director of the Company.
2. On August 14, 2020, the Company filed
an S1 Registration Statement. The Securities and Exchange Commission issued their first set of comments which the Company plans
to respond to shortly.
3. On October 14, 2020, Mr. Fernando Godina
was appointed Executive Vice President of Operations and a Director of the Company.
4. On February 16, 2021 a contract extension
for ninety (90) days was signed between Troy Mining Corporation and Star Alliance International Corporation. A payment of $40,000
was made by Star Alliance that reduces the final amount due to Troy Mining Corporation.