NOTES TO (UNAUDITED) CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 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. 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, an inability to raise sufficient capital
to support 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 as our management recognized 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 several 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.
Proposed Acquisition
Using this new strategy, on
December 9, 2021 we executed a Memorandum of Understanding (the “MOU”) with a Singapore based holding company whose subsidiaries
are engaged principally in foreign exchange remittance services. Under the MOU, our Company desires to acquire 100% of the Singapore based
company for a purchase price of $80,000,000, consisting of common and preferred stock totaling $70,000,000 and subordinated debt of $10,000,000.
The proposed acquisition is subject to due diligence customary to transactions of this type. There can be no assurance that a definitive
agreement between the parties to the transaction can be reached.
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 and nine months ended December 31,
2021, are not necessarily indicative of the results that may be expected for the full year.
Going Concern Considerations
The accompanying interim 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 $930,066
as of December 31, 2021. Effective December 4, 2020, we entered into a Credit Line Agreement with Mambagone, S.A de C.V. (“Mambagone”)
which allowed for advances totaling $1,050,000. However, after advancing us $260,000 under the terms of the Credit Line Agreement, Mambagone
made no further advances. See Note 6 for further information. As such, there is uncertainty whether our capital needs over the next 12
months can be met and, 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 we are unable to obtain adequate capital to meet our working capital needs, 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 December 31, 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 liabilities. 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 December 31,
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 was unable to be put into effect.
As of December 31, 2021, equipment
consists of a laptop computer. Depreciation is being calculated on a straight-line basis over a three-year period and was $94 and $282,
respectively, for the three and nine months ended December 31, 2021. Depreciation for the three and nine months ended December 31, 2020
was $283 and $496, respectively.
5.
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Related Party Transactions
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Due to related party of $4,000
as of December 31, 2021 represents advances by C2C Business Strategies (“C2C”), a large stockholder, to cover certain operating
expenses. From time to time, we have received advances from certain of our large stockholders, which we reported on our Balance Sheets
under the caption Due to related parties. The advances bear no interest and are repayable on demand. There were no Due to related parties
balance at March 31, 2021.
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.
During the nine months ended December 31, 2021 and 2020, we expensed $96,000 and $67,500, respectively, for the services of Mr. Jenkins.
During the three months ended
December 31, 2021, we issued shares of our common stock to one shareholder in settlement of amounts owed to them. We issued 1,153,334
shares to C2C in settlement of $69,200 of due to related party amounts owed to them. The shares issued were valued at $4,613 based on
an independent third-party valuation of the fair value of our common stock and, because this is a related party, the gain was recorded
in additional paid-in capital.
During the three months ended December 31, 2020,
we issued a total of 2,500,000 Series A preferred shares to our CEO and Director. We valued the preferred shares at $150,000 based on
a June 2020 independent third-party valuation of the fair value of the underlying common stock.
Notes payable consists of the following at December
31, 2021 and March 31, 2021:
Schedule of notes payable
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December 31,
2021
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March 31,
2021
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Non-Related Parties:
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Advances under unsecured credit line agreement
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$
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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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(96,584
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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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163,416
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34,116
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Less current portion
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(163,416
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)
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–
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Long-term portion
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$
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–
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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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25,000
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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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)
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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 LOC”) under which Mambagone agreed to advance our Company a total
of $1,050,000 on various dates specified in the LOC. Each advance under the LOC bears interest at 8% per annum and matures, along with
all accrued and unpaid interest, on July 31, 2022. To date, Mambagone has advanced us $260,000. Despite repeated requests on our part
for additional advances as required by the LOC, Mambagone made no further advances. Mambagone’s lack of performance under the LOC
created an event of default by the lender and we sent a letter to Mambagone, via Federal Express, dated December 15, 2021 notifying them
of such default and of our termination of the LOC which letter was received on December 31, 2021. According to the terms of the LOC, a
default by the lender results in a portion of the advances being considered to not be due and payable and shall be considered as forgiven
or fully discharged. Under the guidance of ASC 405-20-15-1, derecognition of a debt that has not been paid can only occur if the debtor
is legally released from the debt, either judicially or by the creditor. We have not yet met the criteria of the relevant guidance but
are attempting to do so. Once met, we expect to extinguish at minimum a portion of the debt.
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 and nine months ended December 31, 2021, we recorded amortization
of debt discount of $41,914 and $124,510, respectively. Amortization for both the three and nine months ended December 31, 2020 was $4,678.
Other Promissory Notes
On July 24, 2020, we issued
an unsecured convertible promissory note to an unrelated third party in the principal amount of $50,000. The note, which bore interest
at 10% per annum, was convertible at $1.00 per share. We determined that this note contained a beneficial conversion feature of $18,432
based on the difference between the fair market value of our common stock on the date of issuance and the conversion price. We recorded
this amount as a debt discount and were amortizing the discount on a straight-line basis over the two-year term of the note. During the
three and nine months ended December 31, 2020 we recorded amortization expense of $1,716 and $4,040 in connection with this note. In January
2021, all amounts owed under this note were forgiven by its holder and, as of December 31, 2021 and March 31, 2021, no amounts are owed
under this note.
During the six months ended
September 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 December 31,
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 $25,000. The note bears interest at 10% per annum and is
payable on demand. No demand has been made for payments against this note.
7.
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Derivative Liabilities
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As stated in Note 6, Notes
Payable, we determined that the advances under the unsecured credit line agreement contained an embedded derivative feature in the form
of a conversion provision which was adjustable based on future prices of our common stock. In accordance with ASC 815-10-25, each derivative
feature was initially recorded at its fair value using the Black-Scholes option valuation method and then re-valued at each reporting
date, with changes in the fair value reported in the statements of operations. Derivative liabilities are classified in the balance sheet
as current or non-current based on whether net-cash settlement of the derivative instrument could be required within 12 months of the
balance sheet date.
The following table represents
our derivative liability activity for the three and nine months ended December 31, 2021:
Schedule of derivative liability activity
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Initial measurement of advances
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$
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264,203
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Derivative expense
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|
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58,082
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Balance at March 31, 2021
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|
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322,285
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Derivative expense
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|
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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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Derivative income
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|
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(91,068
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)
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Balance at September 30, 2021
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245,382
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Derivative income
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|
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(35,747
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)
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Balance at December 31, 2021
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$
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209,635
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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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Nine Months Ended
December 31, 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% to 0.39%
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Annual expected volatility
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164% to 201%
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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 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 December 31,
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 December 31, 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 December 31, 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 nine months ended
December 31, 2021, we issued the following shares:
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1.
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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.
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|
2.
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1,395,348 shares to the same vendor listed in item 1 above under the terms of a Services Agreement dated
April 16, 2021. See Note 9.
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|
3.
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1,153,334 shares to C2C in settlement of Due to related party debt. See Note 5.
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|
4.
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250,000 shares to our attorney in settlement of accounts payable of $15,000. The shares were valued at
$1,000 based on an independent third-party valuation of the fair value of our common stock and, accordingly, we recorded a gain on extinguishment
of debt for this transaction.
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During the nine months ended
December 31, 2020, we issued the following shares:
|
1.
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315,790 shares of our common stock to a vendor for services.
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|
2.
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30,968 shares to two Directors for Board of Director services
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|
3.
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4,000,000 shares to Bulat – see Note 3.
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|
4.
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10,000 shares sold for $5,000.
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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.