NOTES TO (UNAUDITED) CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
1.
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Organization History and Business
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Organization and Business
We were incorporated in the
State of Nevada on July 26, 2013 and are a mineral exploration and production company engaged in the exploration, acquisition, and development
of mineral properties. On April 2, 2020, we entered into a Share Exchange Agreement (the “Exchange Agreement”) with Scythian
Mining Group Ltd. (“SMG”), a United Kingdom company, to acquire 100% interest in SMG-Gold B.V. (“SMG-Gold”), a
Dutch limited liability company (the “SMG-Gold Acquisition”). While the Exchange Agreement was closed on July 7, 2020, it
was never finalized because consideration for the transaction was never fully exchanged. On November 18, 2020, our Board of Directors
voted unanimously to rescind the transaction and return the SMG-Gold shares to SMG. See Note 3 for additional information.
On January 8, 2021, we entered
into a Joint Venture Agreement (the “JV Agreement”) with Provenance Gold Corporation, a Canadian publicly traded company (“PAU”)
to fund and develop a series of 102 lode mineral claims and one (1) patented mining claim, all of which are located in Nye County in the
State of Nevada (the “Venture”). Subsequent to the closing of the JV Agreement, both parties deemed it in their best interests
not to move forward with the Venture based on various factors, including, but not limited to, financial constraints and considerations,
current global economic factors, and general operational difficulties relating to the initial operations of the Venture. Accordingly,
on March 22, 2021, we entered into a Rescission Agreement with PAU rescinding and rendering null and void the JV Agreement, and returning
any funds advanced by either party in connection with the JV Agreement.
On May 10, 2021, we issued
a press release stating our Company was changing its market focus “ Management recognizes that our Company needs to move in a new
direction and will pursue acquisition opportunities that can benefit private companies through our Company’s public status. The
benefit to our Company and its shareholders will be built on acquisitions based on growth and revenue of targeted acquisitions.
We will be restructured as
a holding company seeking transactions on a managed basis, acquiring controlling interest in acquisition targets as subsidiaries of our
Company. Using a holding company strategy, we will be able to mitigate risk while making multiple acquisitions. All targeted acquisitions
must be audited or auditable. We will make either majority or minority investments in companies that meet its investment criteria.
As a holding
company, we will not manufacture anything, sell any products or services, or conduct any other business operations. Our purpose is to
hold the controlling stock or membership interests in other companies.
Our Company
is taking an agnostic approach regarding industry, in almost every contemplated acquisition, we will retain the management team of the
acquired company. The subsidiary’s own management will run the day-to-day business, as this retention of management post
transaction will maintain operational continuity. Our Company’s management will be responsible for overseeing how the subsidiaries
are run and assisting their management as needed.
Our Company is seeking opportunities
in mature private companies that are in transition or growth mode.
We
have begun sourcing opportunities through a number of third-party organizations. Transactions will be subject to industry standard due-diligence
requirements. Of course, no two acquisitions are the same, so the due diligence process will vary from one situation to the next. In general,
however, there are up to five types of due diligence; (i) Business; (ii) Accounting; (iii) Legal; (iv) Valuation and (v) Environmental,
that will need to be completed as part of the process for any proposed transaction.
On March 11, 2020, the World
Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments,
has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The impact on our Company
is not currently determinable, but management continues to monitor the situation.
2.
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Summary of Significant Accounting Policies
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Basis of Presentation
The accompanying unaudited
interim financial statements have been prepared by us pursuant to the rules and regulations of the United States Securities Exchange Commission
(“SEC”). Certain information and disclosures normally included in the annual financial statements prepared in accordance with
the accounting principles generally accepted in the Unites States have been condensed or omitted pursuant to such rules and regulations.
In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been
included. Such adjustments consist of normal recurring adjustments. These interim financial statements should be read in conjunction with
our Company’s historical financial statements and related notes filed with the SEC including our Annual Report on Form 10-K for
the fiscal year ended March 31, 2021 filed on July 12, 2021. The results of operations for the three months ended June 30, 2021, are not
necessarily indicative of the results that may be expected for the full year.
Going Concern Considerations
The accompanying financial
statements have been prepared in conformity with generally accepted accounting principles in the United States, which contemplate continuation
of our Company as a going concern. We currently have no revenues, have incurred net losses, and have an accumulated deficit of $845,541
as of June 30, 2021. Effective December 4, 2020, we entered into a Credit Line Agreement with Mambagone, S.A de C.V. (“Mambagone”)
which allows for advances totaling $1,050,000, $600,000 of which were estimated for general working capital purposes and $450,000 for
required payments under the rescinded JV Agreement. While we estimate that these Mambagone advances will cover our general working capital
needs for at least the next 12 months, that cannot be assured. As a result, there is reasonable doubt about our ability to continue as
a going concern for one year from the date of this report. If our working capital needs are not met with the Mambagone Credit Line Agreement
and we are unable to obtain adequate capital, we could be forced to cease operations.
The continuation of our
Company as a going concern is dependent upon continued financial support from our shareholders, the ability to raise equity or debt
financing, and the attainment of profitable operations from any future business we may acquire. There are no assurances that
we will be successful in obtaining sufficient capital to continue as a going concern.
The accompanying
financial statements do not include any adjustments that might be necessary if our Company is unable to continue as a going
concern.
Fair Value of Financial Instruments
Fair value is defined as the
exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting
guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes
the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that
market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent
of our Company. Unobservable inputs are inputs that reflect our Company’s assumptions about the factors that market participants
would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:
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Level 1
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- Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
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Level 2
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- Include other inputs that are directly or indirectly observable in the marketplace.
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Level 3
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- Unobservable inputs which are supported by little or no market activity.
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The fair value hierarchy also
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Fair value estimates discussed
herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2021 and March 31, 2021.
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments
include cash, accounts payable, and accrued expenses. Fair values for these items were assumed to approximate carrying values because
they are short-term in nature or they are payable on demand. Fair values for derivative liabilities were determined under level 2 since
inputs used are either directly or indirectly observable in the marketplace.
Derivative Financial Instruments
– We account for convertible debt with conversion features representing embedded derivative liabilities in accordance with ASC 815,
Derivatives and Hedging. ASC 815-15-25-1 requires that embedded derivative instruments be bifurcated and assessed on their issuance date
and measured at their fair value for accounting purposes. In determining the appropriate fair value, we use the Black-Scholes option valuation
method, resulting in a reduction of the initial carrying amount of the notes as unamortized debt discount. The unamortized discount is
amortized over the term of each note using the effective interest method.
The fair value of derivative
instruments is recorded and shown separately under liabilities. Changes in the fair value of derivative liabilities are recorded in the
consolidated statement of operations under non-operating income (expense).
We evaluate each of our financial
instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative
financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is
then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based
derivative financial instruments, we use a weighted average Black-Scholes-Merton option-pricing model to value the derivative instruments
at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should
be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified
in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument could be required within
twelve months of the balance sheet date.
Basic and Diluted Net Loss Per Share
We compute net income (loss)
per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per
share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common
shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect
to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock
using the if-converted method. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of June 30, 2021
and 2020, potentially dilutive shares related to our convertible notes payable and Series A Preferred Stock have not been included in
the diluted loss per share computations as they would be antidilutive for the periods presented.
New Accounting Pronouncements
We have reviewed all recently
issued accounting pronouncements and determined that they were either disclosed in our most recently filed Form 10-K or, based on current
operations, are not believed to have a material impact on our financial statements.
As stated in Note 1, on April
2, 2020, we entered into the Exchange Agreement with SMG and SMG’s wholly owned subsidiary SMG-Gold. Under the Exchange Agreement,
SMG agreed to exchange one hundred percent (100%) of the issued and outstanding shares of SMG-Gold for an aggregate of 1,000,000 shares
of our Series A Preferred Stock and 1,000,000 shares of our Series C Preferred Stock (the “Preferred Stock Consideration”).
In November 2019, SMG-Gold had been assigned the rights and obligations of these participatory interests in Altyn Kokus LLP, a limited
liability partnership organized under the laws of Kazakhstan engaged in mining operations, but the assignment was not completed since
the participatory interests had not been legally transferred to SMG-Gold as a result of certain payments not being made to Bulat Kulchimbayev
(“Bulat”), a Kazakhstan national, in consideration for the sale of the participatory interests.
On May 1, 2020, SMG-Gold and Bulat agreed to modify
the obligations payable to Bulat as follows: (1) SMG-Gold would pay Bulat a total of $750,000 in US Dollars, payable at various dates
through October 15, 2020 ($15,000 of which has been paid to date); and (2) in anticipation of the closing of the Exchange Agreement, SMG-Gold
would provide that Palayan Resources, Inc. would issue to Bulat 4,000,000 shares of our restricted common stock. We issued the 4,000,000
shares of our common stock to Bulat on June 8, 2020 and recorded a deposit for the proposed SMG-Gold Acquisition of $16,000 based on an
independent third-party valuation of the fair value of our common stock on the date of issuance.
Bulat never received any cash obligations owed
to him, except for the $15,000 paid by us in July 2020. As such, Bulat did not transfer the participation interests in Altyn Kokus LLP
to SMG-Gold. As a result, the transaction contemplated by the Exchange Agreement was deemed to be incomplete. Accordingly, on November
18, 2020, our Board of Directors voted unanimously to rescind the Exchange Agreement, to return the parties to their respective positions
prior to entering into the Exchange Agreement, to the extent possible, to return the SMG-Gold shares to SMG, and to place a Stop Transfer
Order with our transfer agent for the 4,000,000 shares of our common stock issued to Bulat.
Because of our Board’s decision to rescind
the Exchange Agreement, during the three months ended December 31, 2020, we recorded a General and Administrative expense totaling $31,000,
consisting of the $15,000 paid in cash to Bulat plus $16,000 in value for the 4,000,000 common shares issued to Bulat, since the Stop
Transfer Order has not yet been put into effect.
As of June 30, 2021, equipment
consists of a laptop computer. Depreciation is being calculated on a straight-line basis over a three-year period and was $93 for the
three months ended June 30, 2021. There was no depreciation for the three months ended June 30, 2020.
5.
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Related Party Transactions
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Payable to Stockholder
From time to time, we received
advances from Joel Cortez, our largest stockholder, which we had reported on our Balance Sheets under the caption Due to Related Parties.
All amounts owed to Mr. Cortez were forgiven by him in January 2021 and, as of June 30, 2021 and March 31, 2021, no amounts are owed to
him for the advances. For the three-month period ended June 30, 2021, there were no advances received from or repaid to Mr. Cortez.
Employment Agreement
Under an April 1, 2020 Executive
Employment Agreement, amended December 2, 2020, we retained the services of Mr. James Jenkins, our CEO and Director, by and through C2C
Business Strategies, LLC (formerly Irvine America MB Management, LLC) (“C2C”).
During the three months ended
June 30, 2021 and 2020, we expensed $24,000 and $22,500 for the services of Mr. Jenkins. At June 30, 2021, nothing is owed for the services
of Mr. Jenkins.
Notes payable consists of the following at June
30, 2021 and March 31, 2021:
Schedule of notes payable
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June 30,
2021
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March 31, 2021
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Non-Related Parties:
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Advances under unsecured credit line agreement
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$
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260,000
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$
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260,000
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Less debt discount on amounts borrowed
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(180,411
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)
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(225,884
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)
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Subtotal – non-related parties
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79,589
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34,116
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Less current portion
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–
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–
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Long-term portion
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$
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79,589
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$
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34,116
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Related Party:
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Unsecured promissory note
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$
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25,000
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$
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25,000
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Subtotal – related party
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25,000
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25,000
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Less current portion
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(25,000
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)
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(25,000)
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Long-term portion
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$
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–
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–
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NON-RELATED PARTIES
Unsecured Credit Line Agreement
Effective December 4, 2020,
we entered into a Credit Line Agreement with Mambagone (“the Mambagone LOC”) under which Mambagone agreed to advance our Company
a total of $1,050,000 on various dates specified in the Mambagone LOC. The Mambagone LOC was revised effective January 9, 2021 to reflect
an updated schedule of advances. Each advance under the Mambagone LOC bears interest at 8% per annum and matures, along with all accrued
and unpaid interest, on July 31, 2022.
Mambagone has the right, but
not the obligation, at any time, to convert all or any portion of the outstanding principal amount and accrued interest into fully paid
and non-assessable shares of our common stock. The conversion price shall be equal to seventy-five percent (75%) of the average of the
closing price of our common stock during the ten (10) trading days immediately preceding the conversion date. We determined that the conversion
provisions of the Mambagone LOC contain an embedded derivative feature and we valued the derivative feature separately, recording debt
discount and derivative liabilities in accordance with the provisions of the advances. See Note 7. We are amortizing the debt discount
on a straight-line basis over the term of the advances. For the three months ended June 30, 2021, we recorded amortization of debt discount
of $40,682.
Other Promissory Notes
During the three months ended
June 30, 2020, we issued two (2) notes payable to non-related parties totaling $30,000. The notes were unsecured, bore interest at 10%
per annum, and were due on demand. All amounts owed to the two note holders were forgiven in January 2021 and, as of June 30, 2021 and
March 31, 2021, no amounts are owed under these notes.
RELATED PARTY
Unsecured Promissory Note
On March 16, 2021, we issued
an unsecured promissory note to one of our large stockholders in the amount of $25,000. The note bears interest at 10% per annum and is
payable on demand. No demand has been made for payments against this note.
7.
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Derivative Liabilities
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As stated in Note 6, Notes
Payable, we determined that the advances under the unsecured credit line agreement each contained an embedded derivative feature in the
form of a conversion provision which was adjustable based on future prices of our common stock. In accordance with ASC 815-10-25, each
derivative feature was initially recorded at its fair value using the Black-Scholes option valuation method and then re-valued at the
June 30, 2020 reporting date, with changes in the fair value reported in the statements of operations. Derivative liabilities are classified
in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument could be required within
12 months of the balance sheet date.
The following table represents
our derivative liability activity for the three months ended June 30, 2021:
Schedule of derivative liability activity
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Initial measurement of advances
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$
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264,203
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Derivative expense
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58,082
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Balance at March 31, 2021
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322,285
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Derivative expense
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14,165
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Balance at June 30, 2021
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$
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336,450
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The fair value of the derivative
features of the convertible notes were calculated using the following assumptions:
Schedule of assumptions used to calculate derivative features of convertible notes
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Three Months Ended June 30, 2021
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Expected term in years
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Through 7/31/22
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Risk-free interest rate
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0.07%
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Annual expected volatility
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195%
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Dividend yield
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0.00%
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Risk-free interest rate: We use the risk-free
interest rate of a U.S. Treasury Bill with a similar term on the date of the issuance.
Volatility: We estimate the expected volatility
of the stock price based on the corresponding volatility of our historical stock price for a period consistent with the convertible notes'
expected terms.
Dividend yield: We use a 0% expected dividend
yield as we have not paid dividends to date and do not anticipate declaring dividends in the near future.
Remaining term: The remaining term is based
on the remaining contractual term of the convertible notes.
On June 1, 2020, we amended
our Articles of Incorporation to increase the number of authorized shares of our common stock from 75,000,000 to 500,000,000 and to authorize
the issuance of up to 100,000,000 shares of preferred stock.
Preferred Stock
We are authorized to issue
100,000,000 shares of our $0.001 par value preferred stock and, as of March 31, 2021, have designated three (3) series of preferred stock
whose rights are described below:
Series A Preferred Stock –
we have designated 5,000,000 Series A preferred shares. The Series A preferred ranking is senior to common shares, no dividends are payable,
and each share is convertible into common shares at a rate of 15 common shares for each Series A preferred share. The voting rights for
the Series A preferred was originally designated to be 100 votes for each Series A preferred share. On September 4, 2020 in the First
Amendment to the Exchange Agreement, the voting rights were reduced to 20 votes for each Series A preferred share. As of June 30, 2021
and March 31, 2021, 2,500,000 shares of Series A preferred shares are outstanding.
Series B Preferred Stock –
we have designated 5,000,000 Series B preferred shares. The Series B preferred ranking is senior to common stock, no dividends are payable,
and each share is convertible into common shares at a rate of 10 common shares for each Series B preferred share. The voting rights for
this Series B is designated to be 10 votes for each Series B preferred share. No Series B preferred shares are issued and outstanding
at either June 30, 2021 or March 31, 2021.
Series C Preferred Stock –
we have designated 5,000,000 Series C preferred shares. The Series C preferred ranking is senior to common stock, no dividends are payable,
and each share is convertible into common shares at a rate of 30 common shares for each Series C preferred share. The Series C shares
have no voting rights. No Series C preferred shares are issued and outstanding at either June 30, 2021 or March 31, 2021.
Common Stock
We are authorized to issue
500,000,000 shares of our $0.001 par value common stock and each holder is entitled to one (1) vote on all matters subject to a vote of
stockholders.
During the three months ended
June 30, 2021, we issued 201,451 shares of our common stock to a vendor for services. These shares had been recorded in “Common
Stock to be Issued” at March 31, 2021. We also issued 1,395,348 shares to the same vendor under the terms of a Services Agreement
dated April 16, 2021. See Note 9.
On April 16, 2021, we entered into a Services
Agreement with Cicero Transact Group, Inc. Under the Agreement, Cicero has agreed to rebuild our website and social media sites and help
identify and introduce potential acquisition targets to our Company. Once an acquisition is completed, Cicero has agreed to provide,
at their sole discretion, any number of post-acquisition services listed in the Agreement. As consideration for the services, we issued
Cicero 1,395,348 shares
of our restricted common stock which were vested on the date of the Agreement. We valued the shares at $5,581,
based on a valuation of our Company done by an independent third-party, and recorded a general and administrative expense of that amount
during the three-month period ended June 30, 2021.