NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2021 AND 2020
1.
|
Organization
History and Business
|
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.
As
reported in our Form 8-K filed January 13, 2020, 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 (the “Silver Bow Claims”) and one (1) patented mining claim (the “Blue Horse
Claim”) (collectively, the Silver Bow Claims and the Blue Horse Claim shall be hereinafter referred to as the “Project”),
all of which are located in Nye County in the State of Nevada (the “Venture”). 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. See Note 4 for additional information.
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.
|
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 $711,941 as of March 31, 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 are estimated for general working capital purposes and $450,000 for required payments under the JV Agreement. While we estimate
that these 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.
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. As of March 31, 2021 and 2020, we had no cash equivalents.
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, 2021 and 2020. 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.
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 are 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, 2021 and 2020, we had no potentially dilutive shares.
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.
To
date, Bulat has not received any cash obligations owed to him, except for the $15,000 previously paid by us, and has not transferred
the participation interests in Altyn Kokus LLP to SMG-Gold. It appears highly unlikely that any additional cash obligation will
be paid to Bulat and, as a result, equally unlikely that the participation interests in Altyn Kokus LLP will be transferred to
SMG-Gold. As such, the transaction contemplated by the Exchange Agreement has been deemed to be incomplete. Given the uncertainty
of being able to complete the transaction, on November 18, 2020, our Board of Directors called a Special Meeting in which they
concluded that it was in the best interests of our Company to rescind the SMG-Gold Acquisition. As such, our Board 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.
In
connection with the Exchange Agreement, during the year ended March 31, 2021, we have recorded a General and Administrative expense
totaling $31,000. This amount consists 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 stated in Note 1, on
January 8, 2021, we entered into the JV Agreement with PAU to fund and develop the Silver Bow Claims and the Blue Horse Claim.
Under
the JV Agreement, PAU was to contribute its interest in the Project and its full-time expertise in the mining operations of the
Venture, and in exchange, our Company was to fund the Venture with certain cash payments.
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.
As
of March 31, 2021, equipment consists of a laptop computer. Depreciation was calculated on a straight-line basis over a three-year
period and was $258 for the year ended March 31, 2021.
6.
|
Related Party
Transactions
|
Payable
to Stockholder
From
time to time, we have received advances from and issued promissory notes to Joel Cortez, who at the time was a large stockholder.
These advances, which are reported on our Balance Sheets under the caption Due to Related Parties, bore no interest and were repayable
on demand. On January 12, 2021, Mr. Cortez executed a General Release releasing our Company from any obligation to repay amounts
owed to him. No consideration was paid to Mr. Cortez for the General Release. The amount owed to Mr. Cortez at the time of his
execution of the General Release (and also at March 31, 2020) was $146,425. We recorded this transaction as an extinguishment
of debt - see Note 11 for further information.
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”).
The amended employment agreement calls for monthly payments to C2C for Mr. Jenkins services as follows: $7,500 through December
31, 2020; $10,000 commencing January 1, 2021; and $12,000 commencing April 1, 2021 and thereafter. In addition, Mr. Jenkins will
be provided with business expense reimbursements and employee benefits, if and when offered. No employee benefits are offered
at this time.
During
the year ended March 31, 2021, we have expensed $109,500 for the services of Mr. Jenkins and paid C2C Business Strategies LLC
(formerly IAMB) a like amount. At March 31, 2021, nothing is owed for the services of Mr. Jenkins.
Notes
payable consists of the following at March 31, 2021 and 2020:
|
|
March
31,
2021
|
|
|
March
31,
2020
|
|
Non-Related
Parties:
|
|
|
|
|
|
|
|
|
Unsecured
promissory notes
|
|
$
|
—
|
|
|
$
|
38,000
|
|
Advances
under unsecured credit line agreement
|
|
|
260,000
|
|
|
|
—
|
|
Less
debt discount on amounts borrowed
|
|
|
(225,884
|
)
|
|
|
—
|
|
Subtotal
— non-related parties
|
|
|
34,116
|
|
|
|
38,000
|
|
Less
current portion
|
|
|
—
|
|
|
|
(38,000
|
)
|
Long-term
portion
|
|
$
|
34,116
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Related
Party:
|
|
|
|
|
|
|
|
|
Unsecured
promissory note
|
|
$
|
25,000
|
|
|
$
|
—
|
|
Subtotal
— related party
|
|
|
25,000
|
|
|
|
—
|
|
Less
current portion
|
|
|
(25,000
|
)
|
|
|
—
|
|
Long-term
portion
|
|
$
|
—
|
|
|
$
|
—
|
|
NON-RELATED
PARTIES
Unsecured
Promissory Notes
During
our fiscal year ended March 31, 2020, we issued three unsecured promissory notes to unrelated third parties in the principal amounts
aggregating $38,000. During the six months ended September 30, 2020, we issued two unsecured promissory notes to unrelated third
parties in the principal amounts aggregating $30,000, bringing the total debt for these notes to $68,000. Each note contained
the same terms, bearing interest at 10% per annum and being repayable on demand. On January 12, 2021, each holder of these notes
executed a General Release releasing our Company from any obligation to repay amounts owed to them. No consideration was paid
to the note holders for their General Release. We recorded these transactions as extinguishments of debt - see Note 11 for further
information.
Unsecured
Convertible 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 bears interest at 10% per annum. The note is repayable on the earlier of (1) mandatory and automatic conversion provisions
of the note or (2) the two (2) year anniversary of the note. The principal and accrued interest of this note may be converted,
in whole, into shares of our common stock at the option of the note holder at any time after 30 days from the issue date. In addition,
if at any time prior to maturity (a) the closing price of our common stock for five consecutive trading days equals or exceeds
$2.00 per share, and (b) the daily trading volume equals or exceeds 20,000 shares during the same five consecutive trading days,
then all unpaid principal and accrued interest shall be automatically converted into shares of our common stock. The conversion
price for this note is $1.00 per share. We determined that this convertible note contains 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
have recorded this amount as a debt discount and are amortizing the discount on a straight-line basis over the two-year term of
the note.
On
January 12, 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. We recorded this transaction as an extinguishment
of debt - see Note 11 for further information. During the year ended March 31, 2021 we recorded amortization expense of $36,000
in connection with this note.
On
November 29, 2019, we received $2,100 in cash and $114 in expenses paid by a convertible promissory note, which was unsecured,
bears interest at 10% per annum, is due at the earlier of: (i) 90 days from the date of the note; (ii) successful close of an
equity financing greater than $100,000; or (iii) an event of default, and is convertible into common shares at a conversion price
of $0.001 per share. We recorded a beneficial conversion feature of $2,100, which was amortized over the expected life of the
promissory note. On February 21, 2020, the convertible promissory note was repaid. During the year ended March 31, 2020, we recorded
amortization expense of $2,100.
On
December 13, 2019, we received $825 in cash and $114 in expenses paid by a convertible promissory note, which was unsecured, bears
interest at 10% per annum, and is due at the earlier of: (i) 90 days from the date of the note; (ii) successful close of an equity
financing greater than $100,000; or (iii) an event of default, and is convertible into common shares at a conversion price of
$0.001 per share. We recorded a beneficial conversion feature of $939, which was amortized over the expected life of the promissory
note. On February 21, 2020, the convertible promissory note was repaid. During the year ended March 31, 2020, we recorded amortization
expense of $939.
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, $600,000 of which are estimated
for general working capital purposes and $450,000 for required payments under the JV Agreement. 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 during the year ended March 31, 2021 in accordance
with the provisions of the advances. See Note 8. We are amortizing the debt discount on a straight-line basis over the term of
the advances. For the year ended March 31, 2021, we recorded debt discount of $264,203 and amortization of debt discount of $38,319
in relation to these advances.
RELATED
PARTIES
Unsecured
Promissory Notes
On
September 10, 2020, we issued an unsecured promissory note to a related third party, Mr. Cortez, in the amount of $25,600. The
note bore interest at 10% per annum and was payable on demand. On January 12, 2021, Mr. Cortez executed a General Release releasing
our Company from any obligation to repay amounts owed to him. No consideration was paid to Mr. Cortez for the General Release.
We recorded this transaction as an extinguishment of debt - see Note 11 for further information.
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.
8.
|
Derivative Liabilities
|
As
stated in Note 7, 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 March 31, 2021 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 year ended March 31, 2021:
Initial measurement of advances
|
|
$
|
264,203
|
|
Derivative expense
|
|
|
58,082
|
|
Balance at March 31, 2021
|
|
$
|
322,285
|
|
The
fair value of the derivative features of the convertible notes were calculated using the following assumptions:
|
|
March
31, 2021
|
|
Expected
term in years
|
|
|
Through
7/31/22
|
|
Risk-free interest
rate
|
|
|
0.07% to 0.12%
|
|
Annual expected
volatility
|
|
|
332% to 362%
|
|
Dividend yield
|
|
|
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 blank check 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.
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.
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, 2021 or 2020.
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, 2021 or 2020.
Common
Stock Issued
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, 2021, the following activity took place with respect to our common stock:
(1)
As stated in Note 3, we issued 4,000,000 shares to Bulat at a fair value of $16,000 based on an independent third-party valuation
of the fair value of our common stock on the date of issuance.
(2)
We issued 30,968 shares for Board of Director services rendered by two individuals. We recorded a general and administrative expense
of $124 in connection with this issuance based on an independent third-party valuation of the fair value of our common stock on
the date of issuance.
(3)
We issued 315,790 to a vendor for services and recorded a general and administrative expense of $1,263 in connection with this
issuance based on an independent third-party valuation of the fair value of our common stock on the date of issuance.
(4)
We sold 10,000 shares in the three months ended September 30, 2020 for a total of $5,000.
During the year ended March 31, 2020, we issued 20,000 shares of common
stock to our CEO and President for $10,000 of accrued consulting services performed during the year. On the date of the settlement, the
common stock price was $0.50 per share, resulting in no gain or loss.
Common
Stock To Be Issued
Our
agreement with the vendor in (3) above required us to issue additional shares in the event our stock price decreased from what
it was at the time of the agreement. Based on a decrease in our stock price, the vendor was entitled to receive an additional
201,451 shares of our common stock as of March 31, 2021. The shares were issued in April 2021. We valued this share issuance using
the same valuation as was used for the original stock issuance and recorded an additional general and administrative expense of
$806 during the year ended March 31, 2021.
Our
Company has not filed any tax returns, but we plan on bringing our tax filings current as soon as practical. We are currently
not subject to state income tax filing requirements. As of March 31, 2021, we had net operating loss carry forwards, on a book
basis, of approximately $685,051 that may be available to reduce various future years’ Federal taxable income for 20 years through
2041. 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, 2021
and 2020:
|
|
For the Year
Ended March 31,
2021
|
|
|
For the Year
Ended March 31,
2020
|
|
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, 2021 and 2020 are as follows:
|
|
2021
|
|
|
2020
|
|
US federal statutory income tax rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
Net gains on extinguishment of debt
|
|
|
5.8
|
%
|
|
|
—
|
|
Non-deductible expenses, net of federal benefit
|
|
|
|
|
|
|
|
|
Derivative expense
|
|
|
(2.7
|
)%
|
|
|
|
|
Other permanent differences
|
|
|
(3.4
|
)%
|
|
|
(0.9
|
)%
|
Increase in valuation allowance
|
|
|
(20.7
|
)%
|
|
|
(20.1
|
)%
|
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, 2021 and 2020 consisted of the following:
|
|
2021
|
|
|
2020
|
|
Current
|
|
|
|
|
|
|
|
|
Reserves and accruals
|
|
$
|
2,676
|
|
|
$
|
—
|
|
Non-current
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
|
143,860
|
|
|
|
51,114
|
|
Less: valuation allowance
|
|
|
(146,536
|
)
|
|
|
(51,114
|
)
|
Net deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
During
the years ended March 31, 2021 and 2020, the valuation reserve increased $95,422 and $14,732, 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, 2021, that it was more likely than not the deferred tax assets would not be realized.
On
January 12, 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.
|
|
Principal
|
|
|
Accrued
Interest
|
|
NON-RELATED PARTIES
|
|
|
|
|
|
|
|
|
Unsecured promissory notes – non-related party
|
|
$
|
68,000
|
|
|
$
|
5,935
|
|
Unsecured convertible promissory note – non-related party
|
|
|
50,000
|
|
|
|
2,356
|
|
|
|
$
|
118,000
|
|
|
$
|
8,291
|
|
RELATED PARTIES
|
|
|
|
|
|
|
|
|
Due to related party
|
|
$
|
146,425
|
|
|
$
|
—
|
|
Unsecured promissory note – related party
|
|
|
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 the year ended March 31, 2021.
With regard to the related party debt cancellations, we recorded an increase to additional paid-in capital of $172,895.