NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
1. |
Organization History and Business |
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 are restructuring our Company
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 and we are currently conducting such due diligence.
There can be no assurance that a definitive agreement between the parties to the transaction can be reached.
2. |
Summary of Significant Accounting Policies |
Basis of Presentation
We have prepared the accompanying
financial statements in conformity with generally accepted accounting principles in the United States of America pursuant to the rules
and regulations of the United States Securities and Exchange Commission (“SEC”).
Going Concern Considerations
The accompanying financial
statements have been prepared in conformity with generally accepted accounting principles in the United States of America, 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 $1,004,986 as of March 31, 2022. 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. 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.
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 at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
We consider all highly
liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. Our cash balances as of
March 31, 2022 and 2021, were $426 and $98,889, respectively. We had no
cash equivalents at either date.
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:
|
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
|
Level 2 - Include other inputs that are directly or indirectly observable in the marketplace. |
|
Level 3 - Unobservable inputs which are supported by little or no market activity. |
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 March 31, 2022 and 2021. The
respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments
include cash, prepaid expense, accounts payable and accrued expenses, related party advances and notes payable. 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.
Long-lived Assets
We follow ASC 360-10-15-3,
Impairment or Disposal of Long-lived Assets, which established a “primary asset” approach to determine the cash flow estimation
period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived
assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported
at the lower of carrying amount or fair value less cost to sell.
Income Taxes
We account for income taxes
in accordance with ASC 740 - Income Taxes, which requires us to provide a net deferred tax asset/liability equal to the expected
future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss
or tax credit carry forwards. Tax law and rate changes are reflected in income in the period such changes are enacted. We record a valuation
allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. We include interest and penalties
related to income taxes, including unrecognized tax benefits, within the provision for income taxes.
Our income tax returns, when
filed, will be based on calculations and assumptions that are subject to examination by the Internal Revenue Service and other tax authorities.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations.
We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition
by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit,
including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest
amount that is more than 50% likely of being realized upon settlement. While we believe we have appropriate support for the positions
taken on our tax returns, we regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of
our provision for income taxes. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision,
income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known.
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 potential dilutive shares if their effect is anti-dilutive. As of March 31, 2022
and 2021, 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 accounting
pronouncements recently issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC and have determined that
they are either not applicable or are not believed to have a material impact on our present or future 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 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 year ended March 31, 2021, 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 both March 31, 2022
and 2021, equipment consists of a laptop computer. Depreciation was calculated on a straight-line basis over a three-year period and was
$375 and $258 for the years ended March 31, 2022 and 2021.
5. |
Related Party Transactions |
Due to related party of $54,582
as of March 31, 2022 consists of $52,332 in advances by C2C Business Strategies (“C2C”), a large stockholder, to cover certain
operating expenses and $2,250 owed to one of our outside Directors for Directors fees. 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, as amended, we retained the services of Mr. James Jenkins, our CEO and Director, by and through C2C. During the
years ended March 31, 2022 and 2021, we expensed $132,000 and $109,500, respectively, for Mr. Jenkins services.
During the year ended March
31, 2022, we issued 1,153,334 shares of our common stock 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 a June 2020 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 year ended March 31, 2021, we issued
2,500,000 Series A preferred shares to our CEO and Director. We valued the preferred shares at $150,000 based on the independent third-party
valuation referred to above of the fair value of the underlying common stock.
Notes payable consists of the following at March
31, 2022 and 2021:
Schedule of notes payable | |
| | | |
| | |
| |
March 31, 2022 | | |
March 31, 2021 | |
Non-Related Parties: | |
| | | |
| | |
Advances under unsecured credit line agreement | |
$ | 260,000 | | |
$ | 260,000 | |
Less debt discount on amounts borrowed | |
| (55,581 | ) | |
| (225,884 | ) |
Subtotal — non-related parties | |
| 204,419 | | |
| 34,116 | |
Less current portion | |
| (204,419 | ) | |
| – | |
Long-term portion | |
$ | – | | |
$ | 34,116 | |
| |
| | | |
| | |
Related Party: | |
| | | |
| | |
Unsecured promissory note | |
$ | 25,000 | | |
$ | 25,000 | |
Subtotal — related party | |
| 25,000 | | |
| 25,000 | |
Less current portion | |
| (25,000 | ) | |
| (25,000 | ) |
Long-term portion | |
$ | – | | |
$ | – | |
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 years ended March 31, 2022 and 2021, we recorded amortization of debt
discount of $165,513 and $38,319, respectively. In addition, for the years ended March 31, 2022 and 2021, we recorded interest expense
of $20,800 and $4,790, respectively.
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 $36,000
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. In January
2021, the holder of this note executed a General Release releasing our Company from any obligation to repay amounts owed. No consideration
was paid to the note holder for the General Release. See Note 11 for further information. As of March 31, 2021, no amounts were owed under
this note. During the year ended March 31, 2021 we recorded amortization expense of $36,000 in connection with this note. In addition,
during the year ended March 31, 2021, we recorded interest expense of $2,356 on this note.
During June 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. In January 2021, the holders of these notes executed General Releases releasing our Company from any obligation to repay amounts
owed. No consideration was paid to the note holders for the General Releases. See Note 11 for further information. As of March 31, 2021,
no amounts were owed under this note. Interest expense for these notes totaled $1,737 for the year ended March 31, 2021.
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. Interest expense in connection with this note was $2,603 and
zero for the years ended March 31, 2022 and 2021, respectively.
7. |
Derivative Liabilities |
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 years ended March 31, 2022 and 2021:
Schedule of derivative liability activity | |
| | |
Initial measurement of advances | |
$ | 264,203 | |
Derivative expense | |
| 58,082 | |
Balance at March 31, 2021 | |
| 322,285 | |
Derivative income | |
| (142,104 | ) |
Balance at March 31, 2022 | |
$ | 180,181 | |
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 |
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
March 31, 2021 |
|
Expected term in years |
|
|
Through 7/31/22 |
|
|
Through 7/31/22 |
|
Risk-free interest rate |
|
|
0.07% to 1.63% |
|
|
0.07% to 0.12% |
|
Annual expected volatility |
|
|
164% to 201% |
|
|
332% to 362% |
|
Dividend yield |
|
|
0.00% |
|
|
0.00% |
|
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, 2022, 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.
During the year ended March
31, 2021, 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. 2,500,000 shares of Series A
preferred stock are issued and outstanding at both March 31, 2022 and 2021.
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 March 31, 2022 or 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 March 31, 2022 or 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 year ended March
31, 2022, we issued the following shares:
| 1. | 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. |
| 2. | 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. |
| 3. | 1,153,334 shares to C2C in settlement of Due to related party debt. See Note 5. |
| 4. | 250,000 shares to our attorney in settlement of accounts payable of $15,000. The shares were valued at
$1,000 based on a June 2020 independent third-party valuation of the fair value of our common stock and, accordingly, we recorded a gain
on extinguishment of debt in the amount of $14,000 for this transaction. |
During the year ended March
31, 2021, we issued the following shares:
| 1. | 315,790 shares of our common stock to a vendor for services. The shares were valued at $1,263 based on
a June 2020 independent third-party valuation of the fair value of our common stock. |
| 2. | 30,968 shares to two Directors for Board of Director services. The shares were valued at $125 based on
a June 2020 independent third-party valuation of the fair value of our common stock. |
| 3. | 4,000,000 shares to Bulat – see Note 3. |
| 4. | 10,000 shares sold for $5,000. |
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.
Our Company recently filed
tax returns for the year ended March 31, 2021 but has not filed tax returns for any previous year. We plan on bringing our tax filings
current as soon as practical. As of March 31, 2022, we had net operating loss carry forwards, on a book basis, of approximately $945,284
that may be available to reduce various future years’ Federal taxable income for 20 years through 2042. The Federal tax return for
the year ended March 31, 2021 shows a net operating loss carry forward of $441,621. Net operating losses may be limited resulting from
previous mergers and changes in business. Future tax benefits which may arise because of these losses have not been recognized in the
accompanying financial statements, as their realization is determined not likely to occur and accordingly, we have recorded a valuation
allowance for the deferred tax asset relating to the net operating loss carry forwards. Net operating losses will begin to expire in 2035.
The following table presents
the current income tax provision for federal and state income taxes for the years ended March 31, 2022 and 2021:
Schedule of income tax provision | |
| | | |
| | |
| |
For the
Year Ended
March 31, 2022 | | |
For the
Year Ended
March 31, 2021 | |
Current tax provisions: | |
| | | |
| | |
Federal | |
$ | – | | |
$ | – | |
State | |
| – | | |
| – | |
Total provision for income taxes | |
$ | – | | |
$ | – | |
Reconciliations of the U.S.
federal statutory rate to our actual tax rate for the years ended March 31, 2022 and 2021 are as follows:
Schedule of reconciliation of federal statutory rate to actual tax rate | |
| | | |
| | |
| |
2022 | | |
2021 | |
US federal statutory income tax rate | |
| 21.0% | | |
| 21.0% | |
Net gains on extinguishment of debt | |
| 1.0% | | |
| 5.8% | |
Non-deductible expenses, net of federal benefit | |
| | | |
| | |
Derivative expense | |
| 10.2% | | |
| (2.7 | )% |
Debt discount amortization | |
| (11.9 | )% | |
| (3.4 | )% |
Increase in valuation allowance | |
| (20.3 | )% | |
| (20.7 | )% |
Total provision for income taxes | |
| 0.0% | | |
| 0.0% | |
The components of our deferred
tax assets for federal and state income taxes as of March 31, 2022 and 2021 consisted of the following:
Schedule of deferred tax assets | |
| | | |
| | |
| |
2022 | | |
2021 | |
Current | |
| | | |
| | |
Reserves and accruals | |
$ | 7,590 | | |
$ | 2,676 | |
Non-current | |
| | | |
| | |
Net operating loss carry forwards | |
| 198,510 | | |
| 143,860 | |
Less: valuation allowance | |
| (206,100 | ) | |
| (146,536 | ) |
Net deferred tax assets | |
$ | – | | |
$ | – | |
During the years ended March
31, 2022 and 2021, the valuation reserve increased $59,564 and $95,422, respectively. In assessing the recovery of the deferred tax assets,
management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences
become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax
planning strategies in making this assessment. As a result, management determined, as of March 31, 2022, that it was more likely than
not the deferred tax assets would not be realized.
During the year ended March
31, 2022, we issued shares of common stock to cancel certain indebtedness. As described in Note 5, we issued 1,153,334 shares of our common
stock to C2C in settlement of $69,200 of related party indebtedness. The gain on extinguishment of debt of $68,047 was recorded as an
increase to additional paid-in capital. In addition, as described in Note 8, we issued 250,000 shares of common stock in settlement of
non-related party indebtedness and recorded a gain on extinguishment of debt of $14,000.
During the year ended March
31, 2021, certain creditors agreed to cancel the amounts owed to them through the execution of a general release. The following table
reflects the creditors, types of debt and amounts cancelled.
Schedule of debt mitigation | |
| | | |
| | |
| |
Principal | | |
Accrued Interest | |
NON-RELATED PARTIES | |
| | | |
| | |
Unsecured convertible promissory note | |
$ | 50,000 | | |
$ | 2,356 | |
Unsecured promissory notes – issued in the year ended March 31, 2021 | |
| 30,000 | | |
| 1,737 | |
Unsecured promissory notes – issued in previous years | |
| 38,000 | | |
| 4,198 | |
| |
$ | 118,000 | | |
$ | 8,291 | |
RELATED PARTIES | |
| | | |
| | |
Due to related party | |
$ | 146,425 | | |
$ | – | |
Unsecured promissory note | |
| 25,600 | | |
| 870 | |
| |
$ | 172,025 | | |
$ | 870 | |
Our Company paid no consideration
to these creditors in exchange for the cancellation of their debts. In connection with the non-related party cancellations, we recorded
a gain on extinguishment of debt in the amount of $126,291. In connection with the related party debt cancellations, we recorded an increase
to additional paid-in capital of $172,895.