BrewBilt Brewing Co - Annual Report: 2018 (Form 10-K)

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the Fiscal Year Ended March 31, 2018

For the transition period from ________ to ________

Commission File Number 000-53276

SIMLATUS CORPORATION

(Exact name of registrant as specified in its charter)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

On September 29, 2017, the last business day of the registrants most recently completed second quarter, the aggregate market value of the Common Stock held by non-affiliates of the registrant was $22, based upon the closing price on that date of the Common Stock of the registrant of $0.0001. For purposes of this response, the registrant has assumed that its directors, executive officers and beneficial owners of 5% or more of its Common Stock are deemed affiliates of the registrant.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

As of September 13, 2018, there were 2,914,797 shares of the registrant’s $0.00001 par value common stock issued and outstanding.

Documents incorporated by reference: None

Table of Contents

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

As used in this annual report, the terms “Simlatus”, “we”, “us”, “our” and “our company” refer to Simlatus Corporation, unless otherwise indicated.

PART I

ITEM 1. BUSINESS

General Overview

Simlatus manufactures, in their facility and through various suppliers, its own product line of commercial audio and video systems that offer advanced applications used within the commercial and government broadcast industry and other industries where such applications are required. The Company products are sold through a global distribution network of established audio/video equipment retailers that have been selling the Simlatus products for approximately 20 years.

Simlatus Corporation (“SIML” or “Company”) was incorporated in the State of Nevada under the name Sunberta Resources Inc. on November 15, 2006, as a mining and exploration of mineral claims business.  On November 18, 2009, the Company changed its name to Grid Petroleum Corp. and continued with the mining and exploration of mineral claims operations, exploring mining claims in Alberta, Canada, Vancouver Island, British Columbia, England and the United States.

On March 9, 2016, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with RJM and Associates, LLC, a California limited liability company (“RJM”) whereby RJM’s owners became the directors of the Company and were to be issued $6,250,000 worth of the Company’s stock; $5,000,000 of Restricted Common Stock 90 days from the date of this agreement and $1,250,000 of Preferred Series-A Shares of the Company’s Preferred Stock. On the same date the entire management of RJM became the entire management of the Company.

RJM was incorporated in the State of California on June 11, 2014 for the purpose of operating a broadcast equipment production business.

The Company’s transaction with RJM has been treated as a reverse recapitalization of the Company, with the Company (the legal acquirer of RJM) considered the accounting acquiree, and RJM, whose management took control of the Company (the legal acquiree of the Company) considered the accounting acquirer. The Company did not recognize goodwill or any intangible assets in connection with the transaction. All costs related to the transaction are being charged to operations as incurred. The $6,250,000 worth of shares of Company stock, to be issued in conjunction with the transaction, was presented as a liability until such time that the shares were issued and the liability reduced. The historical financial statements include the operations of the accounting acquirer for all periods presented.

On March 25, 2016, the Company approved a name change to Simlatus Corporation, stock symbol SIML, which was executed on April 4, 2016. The new name change better describes the Company’s new business and new revenues in selling commercial broadcast equipment on a global basis. Simlatus Corporation develops, manufactures, markets and owns proprietary advanced broadcast equipment and software and sells this audio and video broadcast equipment worldwide. These systems have been sold worldwide over the past 15 years including some of the major broadcast companies.   

The Company currently sells approximately 55 different audio/video products and is preparing to market its newest audio/video product referred to as SyncPal™. In addition to the Company’s traditional line of audio/video products, it has commenced the research & development of its Immersive Broadcast System, referred to as the Simlatus-IBS™. The Simlatus-IBS™ will include commercial augmented reality and virtual reality applications for studio engineers. These applications, both hardware and software, will allow the customer to control and manage the studio audio/video systems from anywhere in the world. These products are being developed to serve a market segment that is presently being strongly embraced by consumers and is forecasted, by some of the most widely recognized tech companies in the world, as becoming a multi-billion-dollar market in the very near future. The Market Analysis and IP Portfolio will include new patents specifically developed for these products and owned by the Company.

Competition and Marketing

The Company has performed an in-depth investigation and analysis of our competition and determines this as one of the most important components of our comprehensive market analysis. This allows us to assess our competitor’s strengths and weaknesses in our marketplace and implement effective strategies to improve our competitive advantage. The Company has identified our competition to determine and weigh our attributes, assess our strengths and weaknesses, and uncover our objectives and strategies in our market segment. Key factors contributing to market growth is adoption of HDTV and entertainment distribution via the Internet. The Company has begun to focus new product development in digital and analog/digital conversion solutions to better satisfy changing market demand. Immersive technologies with augmented reality and virtual reality await the near future for the Broadcast Industry. Simlatus has access to top professionals in Immersive Technology and is now designing their new Immersive Broadcast Studio (IBS).

The global broadcast switcher market is expected to reach $2B by 2020, as compared to the broadcast switcher market in 2013 of $1.28B. The CAGR growth of 6.7% will occur from 2014 to 2020, whereas augmented reality devices which combine virtual objects with the real world through high-tech glasses, are forecast to become a $120 billion business by 2020. New media channels and automation will substantially drive market growth over the next 5 years, and Simlatus has initiated its B2B and B4B platform with its domestic and international distribution

We have determined that a business marketing a product similar to, or as a substitute for, our own product in the same geographic area is a direct competitor. Firms offering dissimilar or substitute products in relation to our products or services are considered indirect competitors. Indirect competition would exist between the manufacturing of commercial broadcast equipment selling to the same customers. To achieve and maintain a competitive advantage in reaching and selling to our target market, our management has gained a thorough knowledge of our competition. An in-depth competitive analysis has provided the company with understanding of how our existing and potential customers rate the competition, a positive identification of our competitor’s strengths and weaknesses, and a mechanism to develop effective competitive strategies in our target market.

Our competitors are a part of a concentrated market where only a handful of competitors exist. We have identified approximately 22 competitors in our industry. Our top 3 competitors are Ensemble Designs, Inc., Thomson Video Networks, Inc., and Ericcson A.B. The company currently manufacturers a product for Ensemble Designs, Inc.

The basis in which our company is able to compete is based upon the price point and quality that we provide to our end-user. We have 25 distributors providing global sales of all of our 55 products. Simlatus offers a wide range of broadcast products including switchers, controllers, protection switches, HD and Analog Routers, Audio Distribution and our SoundPal family of audio/video signaling products. Our newest product being SyncPal.

Our competitors are profitable, and the industry is expanding into augmented/virtual audio-video products. Our product line and Ensemble Designs, Inc. have been in business for approximately 20 years. The attributes that the majority of customers request is pricing and support. Simlatus and all of our competition provide warranty and repair services for all products. Our current customers include Fox News, DirecTV, Warner Bros. and a variety of government-based buyers for military and government locations.

We provide an informative website for all of our products, company information and distribution. We provide various testimonial statements from major customers. We further advertise in trade journals and through our distribution websites. Each of our products includes a complete manual and specifications data sheet.

Our sales staff has more access to competitive information than anyone else in our organization. Customers often show our sales people sales literature, contracts, price quotes, and other information from competitors. It is our responsibility to obtain customers to discuss problems they have with a competitor’s product. Customers will also reveal our competition’s product benefits, strengths, and customer service programs. We instruct our sales force to ask for copies of any competitive literature if and when that’s possible. All sales staff maintains a record of all competitive information they discover and devote a regular portion of each sales meeting to a discussion of the competition. Our other employees working in other areas of the company also become exposed to competitive information.

In regards to our Trade Associations, Simlatus compiles and has access to published industry statistics and reports regarding industry news and leaders through trade association magazines and newsletters. Most trade associations also sponsor trade shows and other professional meetings. This is an opportunity for our company to experience first-hand what our competition is producing. It also provides the opportunity to discover new players who may soon become our competition.

We interview our customers, suppliers, and industry experts about our competition’s product and service periodically. Once we’ve gathered all of the competitive data we analyze the data to determine product information, market share, marketing strategies, and to identify our competition’s strengths and weaknesses. We rely on our sales staff and customer feedback what product features and benefits are most important to our customers and potential customers. A product’s or services competitive position is largely determined by how well it is differentiated from our competition and by its price.

Our products have been sold for approximately 20 years and our sales strategy provides the company an advantage with our existing dealers & customers, existing product line, existing Broadcast users, Manufacturing Processes, Experienced Personnel, Professional Management, and Quality Product Reputation. Simlatus is positioned with current sales of their commercial broadcasting support systems and is now structuring the R&D virtual/augmented reality products to develop a strategic technology roadmap which will enable the company to expand into high-growth digital television and over-the-top (OTT) markets. These products are being developed for Simlatus’ existing consumers and newer markets. Further, Simlatus understands market trends, including worldwide movement towards high speed, IP software solutions. Simlatus will continue to focus on driving adoption of upgraded technology and the company’s R&D focus will be on programs to out-pace competition.

Employees

As of the date of this filing, the Company has 3 employees. In addition, the Company contracts 14 engineering consultants and engages 8 suppliers for product development and manufacturing.

ITEM 1A. RISK FACTORS

The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal executive offices are located at 175 Joerschke Drive, Suite A, Grass Valley, CA 95945. Additional space may be required as the Company expands its operations. Management does not foresee any significant difficulties in obtaining any required additional space. The Company currently does not own any real property.

ITEM 3. LEGAL PROCEEDINGS

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

ITEM 4. MINE SAFETY DISCLOSURE

None.

PART II

ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock

Our common stock is currently quoted on the OTC Markets. Our common stock has been quoted on the OTC Markets since October 17, 2007 trading under the symbol “SBRT”. On January 15, 2008, our symbol was changed to “SBTR” and on December 15, 2009, our symbol was changed to “GRPR” to reflect our Company’s name change. On April 21, 2016, our symbol was changed to “SIML” to reflect our Company’s name change to Simlatus Corporation. Because we are quoted on the OTC Markets, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.

The following table sets forth the high and low bid prices for our common stock per quarter as reported by the OTCQB for the period from April 1, 2017 through March 31, 2018, and April 1, 2016 through March 31, 2017, based on our fiscal year end March 31. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.

Record Holders

As of March 31, 2018, there were 2,914,797 shares of the registrant’s $0.00001 par value common stock issued and outstanding, which were held by 26 shareholders of record.

Dividends

We have not paid dividends on our common stock, and do not anticipate paying dividends on our common stock in the foreseeable future.

Securities authorized for issuance under equity compensation plans

We have no compensation plans under which our equity securities are authorized for issuance.

Performance graph

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Recent Sales of Unregistered Securities

On April 27, 2017, the Company issued 53,333 shares of common stock for services valued $24,000, based on the market price of the Company’s common stock on the date of agreement.

During the year ended March 31, 2018, the holders of convertible notes converted a total of $161,336 of principal into 2,081,577 shares of common stock. The common stock was valued at $818,595 based on the market price of the Company’s stock on the date of conversion. The issuance extinguished $1,202,404 worth of derivative liabilities and $202,809 was recorded as a loss on settlement of debt.

Recent issuances of unregistered securities subsequent to our fiscal year ended of March 31, 2018

None.

Issuer Repurchases of Equity Securities

None.

ITEM 6. SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Results for the Year Ended March 31, 2018 Compared to the Year Ended March 31, 2017

Revenues:

The Company’s revenues were $23,405 for the year ended March 31, 2018 compared to $68,955 for the year ended March 31, 2017. The decrease in revenue was due to a decrease in audio and video broadcasting product orders from the prior year.

Cost of Sales:

The Company’s cost of materials was $89,263 for the year ended March 31, 2018, compared to $52,203 for the year ended March 31, 2017. Although there was decrease in cost of materials due to a reduction in materials necessary to fulfill orders, the overall increase in cost of sales was due to inventory impairment of $61,188 recorded during the year ended March 31, 2018.

Operating Expenses:

Operating expenses consisted primarily of consulting fees, professional fees, salaries and wages, office expenses and fees associated with preparing reports and SEC filings relating to being a public company. Operating expenses for the year ended March 31, 2018, and March 31, 2017, were $862,527 and $827,176, respectively. The increase was primarily attributable to an increase in professional fees related to new consulting agreements. During the year ended March 31, 2018, the Company increased promotional activities and incurred additional costs to meet SEC reporting requirements.

Other Income (Expense):

Other income (expense) for the year ended March 31, 2018, and March 31, 2017, was $(3,470,164) and $(5,173,408), respectively. Other income (expense) consisted of gain or loss on debt forgiveness, gain or loss on derivative valuation and interest expense. The gain or loss on derivative valuation is directly attributable to the change in fair value of the derivative liability. Interest expense is primarily attributable to interest and penalties on outstanding notes payable, the initial interest expense associated with the valuation of derivative instruments at issuance, and the accretion of the convertible debentures over their respective terms. The decrease primarily resulted from the fluctuation of the Company’s stock price which impacted the valuation of the derivative liabilities and the change in the gain/loss on debt settlement between periods based on the amount of debt converted and the difference between the value of the stock issued and the debt extinguished.

Net Loss:

Net loss for the year ended March 31, 2018, was $4,398,549 compared with a net loss of $5,983,832 for the year ended March 31, 2017. The decreased net loss can be explained by the changes in the gain in the fair value of derivative liabilities offset with and the gain on settlement of debt recorded in the prior period.

Impact of Inflation

We believe that the rate of inflation has had a negligible effect on our operations.

Liquidity and Capital Resources

The overall working capital (deficit) increased from $(10,810,144) at March 31, 2017 to $(11,794,603) at March 31, 2018.

During the year ended March 31, 2018, cash used in operating activities was $236,089 compared to $208,598 for the year ended March 31, 2017. The increase in the cash used in operating activities is primarily attributed to the loss in the settlement with the former CEO, penalties on convertible debt and accrued interest.

During the year ended March 31, 2018 cash used in investing activities was $0 compared to $0 for the year ended March 31, 2017.

During the year ended March 31, 2018, cash from financing activity was $237,190 compared to $205,575 for the year ended March 31, 2017. The increase in cash from financing activity primarily resulted from an increase in the proceeds from convertible notes during the year ended March 31, 2018.

As of March 31, 2018, the Company had a cash balance and asset total of $2,431 and $8,626 respectively, compared with $1,330 and $79,959 of cash and total assets, respectively, as of March 31, 2017. The decrease in assets was due to the amortization of prepaid expenses and inventory impairment.

As of March 31, 2018, the Company had total liabilities of $11,864,229 compared with $10,890,103 as of March 31, 2017. The increase in total liabilities was primarily attributed to the to a loss in the fair value of derivative liabilities and an increase in convertible note payable accrued interest.

Going Concern

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. Since its inception, the Company has been funded by related parties through capital investment and borrowing funds.

As of March 31, 2018, we have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our March 31, 2018 audited financial statements that they have substantial doubt that we will be able to continue as a going concern.

Future Financings

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which replaces existing revenue recognition guidance. The updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the standard on April 1, 2018, using a modified retrospective approach, with the cumulative effect of initially applying the standard recognized in retained earnings at the date of adoption.

While the Company does not expect the adoption of this standard to have a material impact on the Company’s net Revenues in the Statements of Income, the Company anticipates revenues for certain wholesale transactions and substantially all digital commerce sales will be recognized upon shipment rather than upon delivery to the customer.

Additionally, provisions for post-invoice sales discounts, returns and miscellaneous claims will be recognized as accrued liabilities rather than as reductions to Accounts receivable, net; and the estimated cost of inventory associated with the provision for sales returns will be recorded within Prepaid expenses and other current assets on the Balance Sheets. The Company continues to evaluate the impact of this new standard, including on accounting policies, disclosures, internal control over financial reporting and its contracts with customers.

In February 2016, the FASB issued ASU 2016-02 (ASC Topic 842), Leases. The ASU amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of assessing the impact on its financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). Among other provisions, this ASU requires that when determining whether certain financial instruments should be classified as liabilities or equity instruments, an entity should not consider the down round feature. The ASU also recharacterizes as a scope exception the indefinite deferral available to private companies with mandatorily redeemable financial instrument and certain noncontrolling interests, which does not have an accounting effect but addresses navigational concerns within the FASB Accounting Standards Codification. The provisions of the ASU related to down rounds are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is in the process of assessing the impact on its financial statements.

Contractual Obligations

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not hold any assets or liabilities requiring disclosure under this item.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SIMLATUS CORPORATION

FINANCIAL STATEMENTS

Table of Contents

To the Board of Directors and

Stockholders of Simlatus Corporation

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Simlatus Corporation (the Company) as of March 31, 2018, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year ended March 31, 2018, and the related notes and schedules (collectively referred to as the financial statements). The financial statements for the period ended March 31, 2017 were audited by other auditors who report expressed an unqualified opinion on the financial statements. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2018, and the results of its operations and its cash flows for the year ended March 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company suffered losses from operations which raise substantial doubt about its ability to continue as a going concern. Managements plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ M&K CPAS, PLLC

We have served as the Company’s auditor since 2018.

Houston, TX

September 24, 2018

Mac Accounting Group, LLP

Certified Public Accountants

Report of Independent Registered Public Accounting Firm

Board of Directors

Simlatus Corporation

Grass Valley, California

We have audited the accompanying balance sheet of Simlatus Corporation as of March 31, 2017, and the related statement of operations, stockholders’ deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Simlatus Corporation as of March 31, 2017, and the results of their operations and their cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has experienced losses from operations since inception, has limited business operations, and has total liabilities in excess of total assets. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Midvale, Utah

October 25, 2017

www.macaccountinggroup.com

1070 Mecham Lane, Midvale, Utah 84047

801.414.3664

The accompanying notes are an integral part of these financial statements

The accompanying notes are an integral part of these financial statements

The accompanying notes are an integral part of these financial statements

The accompanying notes are an integral part of these financial statements

Organization and Description of Business

Simlatus Corporation (“SIML” or “Company”) was incorporated in the State of Nevada under the name Sunberta Resources Inc. on November 15, 2006, as a mining and exploration of mineral claims business.  On November 18, 2009, the Company changed its name to Grid Petroleum Corp. and continued with the mining and exploration of mineral claims operations, exploring mining claims in Alberta, Canada, Vancouver Island, British Columbia, England and the United States.

On March 9, 2016, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with RJM and Associates, LLC, a California limited liability company (“RJM”) whereby RJM’s owners became the directors of the Company and were to be issued $6,250,000 worth of the Company’s stock; $5,000,000 of Restricted Common Stock 90 days from the date of this agreement and $1,250,000 of Preferred Series-A Shares of the Company’s Preferred Stock (the “Acquisition”). On the same date, the entire management of RJM became the entire management of the Company. The Company’s transaction with RJM has been treated as a reverse recapitalization of the Company, with the Company (the legal acquirer of RJM) considered the accounting acquiree and RJM, whose management took control of the Company (the legal acquiree of the Company), considered the accounting acquirer. The historical financial statements include the operations of the accounting acquirer (RJM) for all periods presented.

RJM was incorporated in the State of California on June 11, 2014, for the purpose of operating a broadcast equipment production business.

On March 25, 2016, the Company approved a name change to Simlatus Corporation, stock symbol SIML, which was executed on April 4, 2016. The new name change better describes the Company’s new business and new revenues in selling commercial broadcast equipment on a global basis. Simlatus Corporation develops, manufactures, markets and owns proprietary advanced broadcast equipment and software and sells this audio and video broadcast equipment worldwide. These systems have been sold worldwide over the past 15 years including some of the major broadcast companies.   

The Company currently sells approximately 55 different audio/video products and is preparing to market its newest audio/video product referred to as SyncPal™. In addition to the Company’s traditional line of audio/video products, it has commenced the research & development of its Immersive Broadcast System, referred to as the Simlatus-IBS™. The Simlatus-IBS™ will include commercial augmented reality and virtual reality applications for studio engineers. These applications, both hardware and software, will allow the customer to control and manage the studio audio/video systems from anywhere in the world. These products are being developed to serve a market segment that is presently being strongly embraced by consumers and is forecasted, by some of the most widely recognized tech companies in the world, as becoming a multi-billion-dollar market in the very near future. The Market Analysis and IP Portfolio will include new patents specifically developed for these products and owned by the Company.

Financial Statement Presentation 

The audited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Fiscal Year End 

The Company has selected March 31 as its fiscal year end.

Use of Estimates

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles of United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Actual results could differ from those estimates.

Cash Equivalents

The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.

Revenue recognition and Related Allowances

The Company adopted ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”) as amended, as of April 1, 2018 with no material impact. The Company primarily generates net revenue through product sales to distributors and to retail customers on its website. Revenue is recognized upon transfer of control of promised products to customers which is generally upon shipment in an amount that reflects the consideration we expect to receive in exchange for those products or services. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at the amount that management expects to collect from outstanding balances. Bad debts and allowances are provided based on historical experience and management’s evaluation of outstanding accounts receivable. Management evaluates past due or delinquency of accounts receivable based on the open invoices aged on due date basis. The allowance for doubtful accounts at March 31, 2018 and March 31, 2017 is $0.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the fiscal year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

Loss Per Share

Basic loss per share of common stock is computed by dividing the net loss by the weighted average number of common shares outstanding during the period after giving retroactive effect to the reverse stock split affected on November 1, 2017 (see Note 10). Diluted earnings (loss) per share is equal to the basic per share for the years ended March 31, 2018 and 2017. Common stock equivalents are not included in the loss per share since they are anti-dilutive. All per share amounts have been adjusted for the reverse stock split.

Inventories

Inventories are stated at the lower of cost, computed using the first-in, first-out method and net realizable value. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period. During the year ended March 31, 2018, the Company recorded an impairment to inventory of $61,188. During the year ended March 31, 2017, the Company recorded an allowance for obsolete inventory of $125,329. As of March 31, 2018 and March 31, 2017, the Company’s inventories consist primarily of raw materials and supplies rather than finished goods and are presented net of an allowance for obsolete inventory of $1,435 and $68,629, respectively.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels and which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

These levels are:

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of March 31, 2018 and 2017 for each fair value hierarchy level:

In management’s opinion, the fair value of convertible notes payable and advances payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments. As of March 31, 2018 and 2017, the balances reported for cash, accounts receivable, prepaid expenses, accounts payable, and accrued liabilities, approximate the fair value because of their short maturities.

Income Taxes

The Company records deferred taxes in accordance with FASB ASC No. 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

As of the date of this filing, the Company is delinquent in filing their tax returns, and there is uncertainty regarding potential penalties and interest.  The last return filed by the Company was March 31, 2012, and the Company has not accrued any potential penalties or interest from that period forward.  The Company will need to file returns for the years ending March 31, 2013, 2014, 2015, 2016 and 2017, which are still open for examination.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which replaces existing revenue recognition guidance. The updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the standard on April 1, 2018, using a modified retrospective approach, with the cumulative effect of initially applying the standard recognized in retained earnings at the date of adoption.

While the Company does not expect the adoption of this standard to have a material impact on the Company’s net Revenues in the Statements of Income, the Company anticipates revenues for certain wholesale transactions and substantially all digital commerce sales will be recognized upon shipment rather than upon delivery to the customer.

Additionally, provisions for post-invoice sales discounts, returns and miscellaneous claims will be recognized as accrued liabilities rather than as reductions to Accounts receivable, net; and the estimated cost of inventory associated with the provision for sales returns will be recorded within Prepaid expenses and other current assets on the Balance Sheets. The Company continues to evaluate the impact of this new standard, including on accounting policies, disclosures, internal control over financial reporting and its contracts with customers.

In February 2016, the FASB issued ASU 2016-02 (ASC Topic 842), Leases. The ASU amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of assessing the impact on its financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). Among other provisions, this ASU requires that when determining whether certain financial instruments should be classified as liabilities or equity instruments, an entity should not consider the down round feature. The ASU also recharacterizes as a scope exception the indefinite deferral available to private companies with mandatorily redeemable financial instrument and certain noncontrolling interests, which does not have an accounting effect but addresses navigational concerns within the FASB Accounting Standards Codification. The provisions of the ASU related to down rounds are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is in the process of assessing the impact on its financial statements.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of March 31, 2018, the Company has an accumulated deficit of $10,904,388 since its inception and working capital deficit of $11,794,603, negative cash flows from operations, and has limited business operations, which raises substantial doubt about the Company’s ability to continue as going concern. The ability of the Company to meet its commitments as they become payable is dependent on the ability of the Company to obtain necessary financing or achieving a profitable level of operations. There is no assurance the Company will be successful in achieving these goals.

The Company does not have sufficient cash to fund its desired research and development objectives for its augmented/virtual reality product development for the next 12 months. The Company has arranged financing and intends to utilize the cash received to fund the research and development project. This financing may be insufficient to fund expenditures or other cash requirements required to complete the product design for the augmented/virtual reality markets. There can be no assurance the Company will be successful in completing any new product development. The Company plans to seek additional financing if necessary in private or public equity offering(s) to secure future funding for operations. There can be no assurance the Company will be successful in raising additional funding. If the Company is not able to secure additional funding, the implementation of the Company’s business plan will be impaired. There can be no assurance that such additional financing will be available to the Company on acceptable terms or at all.

These financial statements do not give effect to adjustments to the amounts and classification to assets and liabilities that would be necessary should the Company be unable to continue as a going concern.

Prepaid fees represent amounts paid in advance for future contractual benefits to be received. Contracting expenses paid in advance are recorded as a prepaid asset and then amortized to the statements of operations when services are rendered, or over the life of the contract using the straight-line method.

During the years ended March 31, 2018 and 2017, the Company amortized prepaid expenses of $0 and $10,000, respectively, for legal fees billed and paid in advance for April through August 2017, at $2,000 per month.

As of March 31, 2018, and March 31, 2017, notes payable were comprised of the following:

ARC Capital Ltd

On October 1, 2015, the Company accepted and agreed to a Debt Purchase Agreement, whereby ARC Capital Ltd acquired $16,000 in principal and $5,625 of interest of a Direct Capital Group, Inc. convertible note in exchange for $21,625. The note bears interest at 8% per annum (increases to 24% per annum upon an event of default), matured on April 2, 2016, and is convertible into common stock at 50% of the lowest closing market price of the prior 15 trading days including the day upon which the notice of conversion is received by the Company. The Company recorded a debt discount from the derivative equal to $21,625 due to this conversion feature. The note had accrued interest of $8,260 as of March 31, 2018 and $5,470 as of March 31,2017. The debt discounts had a balance at March 31, 2018 of $0 and $0 at March 31, 2017. During the years ended March 31, 2018 and 2017, the principal amounts of $9,000 and $10,000, respectively, were converted into shares. The Company recorded debt discount amortization expense of $0 during the year ended March 31, 2018 and $0 during the year ended March 31, 2017. The principal balance as of March 31, 2018 and 2017, was $2,625 and $11,625, respectively. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Asher Enterprises, Inc.

On September 16, 2011, the Company accepted and agreed to a Debt Purchase Agreement, whereby Asher Enterprises, Inc. acquired $40,000 of a Special Situations Fund One convertible note in exchange for $40,000. The note bears interest at 8% per annum (increases to 22% per annum upon an event of default), matured on June 20, 2012, and is convertible into common stock at 50% multiplied by the average of the 3 lowest closing market prices of the 10 trading days prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $40,000 due to this conversion feature. The note had accrued interest of $0 as of March 31, 2018 and $21,038 as of March 31,2017. The debt discounts had a balance at March 31, 2018 of $0 and $0 at March 31, 2017. The Company recorded debt discount amortization expense of $0 during the year ended March 31, 2018 and $0 during the year ended March 31, 2017. The principal balance as of March 31, 2018 and 2017, was $13,000 and $13,000, respectively. This note currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Auctus Fund LLC

On August 9, 2017, the Company issued a convertible note to Auctus Fund LLC for $46,750, of which $40,000 was received in cash $6,750 was recorded as transaction fees. The note bears interest at 10% (increases to 24% per annum upon an event of default), matured on August 22, 2017, and is convertible into the lower of 1) 54% multiplied by the average of the two lowest trading prices during the 25 day trading period on the trading day prior to the date of the note, and 2) 54% multiplied by the average of the two lowest trading prices during the 25 day trading period on the trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $46,750 due to this conversion feature. Pursuant to the default terms of the note, the Company entered a penalty of $210,097 in interest during the year ended March 31, 2018. The note had accrued interest of $213,094 as of March 31, 2018 and $2,997 as of March 31,2017. The debt discounts had a balance of $6,679 as of March 31, 2018 and $0 as of March 31, 2017. The Company recorded debt discount amortization expense of $40,071 and $0 as of March 31, 2018 and 2017, respectively. The principal balance as of March 31, 2018 and 2017, was $46,750 and $46,750, respectively. This note currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On December 16, 2016, the Company issued a convertible note to Auctus Fund LLC for $46,750, of which $40,000 was received in cash $6,750 was recorded as transaction fees. The note bears interest at 10% (increases to 24% per annum upon an event of default), matured on September 16, 2017, and is convertible into the lower of 1) 54% multiplied by the average of the two lowest trading prices during the 25 day trading period on the trading day prior to the date of the note, and 2) 54% multiplied by the average of the two lowest trading prices during the 25 day trading period on the trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $46,750 due to this conversion feature. Pursuant to the default terms of the note, the Company entered a penalty of $191,562 in interest during the year ended March 31, 2018. The note had accrued interest of $204,127 as of March 31, 2018 and $1,345 as of March 31,2017. The debt discounts had a balance of $0 as of March 31, 2018 and $28,835 as of March 31, 2017. The Company recorded debt discount amortization expense of $28,835 and $17,915 as of March 31, 2018 and 2017, respectively. The principal balance as of March 31, 2018 and 2017, was $46,750 and $46,750, respectively. This note currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Blackbridge Capital

On May 3, 2016, the Company accepted and agreed to a Debt Purchase Agreement, whereby Blackbridge Capital acquired $100,000 in principal of a Direct Capital Group, Inc. convertible note in exchange for $100,000. The note bears interest at 5% per annum, matured on May 3, 2017, and is convertible into common stock at 50% of the lowest market price of the 20 trading days prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $100,000 due to this conversion feature. The note had accrued interest of $7,703 as of March 31, 2018 and $3,683 as of March 31,2017. The debt discounts had a balance at March 31, 2018 of $0 and $7,269 at March 31, 2017. During the years ended March 31, 2018 and 2017, the principal amounts of $0 and $19,600, respectively, were converted into shares. The Company recorded debt discount amortization expense of $7,269 during the year ended March 31, 2018 and $73,668 during the year ended March 31, 2017. The principal balance as of March 31, 2018 and 2017, was $80,400 and $80,400, respectively. This note currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Carl Ambrose

On March 23, 2017, the Company transferred a promissory note with Carl Ambrose into a convertible note for $20,914. The note bears interest at 3%, matures on September 1, 2018, and is convertible into convertible into common stock at 50% of the lowest trading price of the date of conversion. The Company recorded a debt discount from the derivative equal to $20,914 due to this conversion feature. On April 20, 2017, the note was acquired by Tri-Bridge Ventures LLC for $20,914. The note had accrued interest of $0 as of March 31, 2018 and $0 as of March 31,2017. The debt discounts had a balance of $0 as of March 31, 2018 and $20,596 as of March 31, 2017. The Company recorded debt discount amortization expense of $20,596 and $317 as of March 31, 2018 and 2017, respectively. The principal balance as of March 31, 2018 and 2017, was $0 and $20,914, respectively.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Direct Capital Group, Inc.

On April 7, 2016, the Company issued a convertible note to Direct Capital Group, Inc. for $25,000, for cash consideration. The note bears interest at 6% (increases to 8% per annum upon an event of default), matured on October 7, 2016, and is convertible into common stock at 68% multiplied by the average closing price for the 5 trading days prior to the conversion date. The Company recorded a debt discount from the derivative equal to $25,000 due to this conversion feature. The note had accrued interest of $0 as of March 31, 2018 and $1,711 as of March 31,2017. The debt discounts had a balance of $0 as of March 31, 2018 and $0 as of March 31, 2017. The Company recorded debt discount amortization expense of $0 and $0 as of March 31, 2018 and 2017, respectively.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On May 17, 2016, the Company issued a convertible note to Direct Capital Group, Inc. for $36,000, for cash consideration. The note bears interest at 6% (increases to 8% per annum upon an event of default), matured on November 17, 2016, and is convertible into 68% multiplied by the average closing price for the 5 trading days prior to the conversion date. The Company recorded a debt discount from the derivative equal to $36,000 due to this conversion feature. The note had accrued interest of $0 as of March 31, 2018 and $2,146 as of March 31,2017. The debt discounts had a balance of $0 as of March 31, 2018 and $0 as of March 31, 2017. The Company recorded debt discount amortization expense of $0 and $0 as of March 31, 2018 and 2017, respectively.

On October 1, 2017, the Company accepted the request from Direct Capital Group, Inc, to cancel the two convertible notes with a total principal amount of $61,000 and interest of $6,304 and exchange the notes for a promissory note (see Note #5).

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

EMA Financial, LLC

On November 9, 2016, the Company issued a convertible note to EMA Financial, LLC for $35,000, of which $30,000 was received in cash $5,000 was recorded as transaction fees. The note bears interest at 10% (increases to 24% per annum upon an event of default), matured on November 9, 2017, and is convertible into the lower of 1) the closing market price on the trading day immediately preceding the closing date of the note, and 2) 50% of the lowest trading price during the 25 trading days prior to the conversion date. The Company recorded a debt discount from the derivative equal to $35,000 due to this conversion feature. Pursuant to the default terms of the note, the Company entered a penalty of $250,330 in principal and $23,143 in interest during the year ended March 31, 2018. The note had accrued interest of $26,415 as of March 31, 2018 and $1,362 as of March 31,2017. The debt discounts had a balance of $0 as of March 31, 2018 and $21,384 as of March 31, 2017. During the years ended March 31, 2018 and 2017, the principal amounts of $12,754 and $0, respectively, were converted into shares. The Company recorded debt discount amortization expense of $21,384 and $13,616 as of March 31, 2018 and 2017, respectively. The principal balance as of March 31, 2018 and 2017, was $272,576 and $35,000, respectively. This note currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Emunah Funding LLC

On October 18, 2017, the Company issued a convertible note to Emunah Funding LLC in consideration of liquidated damages in the amount of $110,000. The note bears no interest, matures on October 18, 2018, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $110,000 due to this conversion feature. The debt discounts had a balance at March 31, 2018 of $60,575 and $0 at March 31, 2017. The Company recorded debt discount amortization expense of $49,425 during the year ended March 31, 2018 and $0 during the year ended March 31, 2017. The principal balance as of March 31, 2018 and 2017, was $110,000 and $0, respectively.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On October 18, 2017, the Company accepted and agreed to a Debt Purchase Agreement, whereby Emunah Funding LLC acquired $20,000 of debt from a Tri-Bridge Ventures LLC convertible note in exchange for $25,000. The note bears no interest, matures on October 18, 2018, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $25,000 due to this conversion feature. The debt discounts had a balance at March 31, 2018 of $13,767 and $0 at March 31, 2017. During the years ended March 31, 2018 and 2017, the principal amounts of $5,000 and $0, respectively, were converted into shares. The Company recorded debt discount amortization expense of $11,233 during the year ended March 31, 2018 and $0 during the year ended March 31, 2017. The principal balance as of March 31, 2018 and 2017, was $20,000 and $0, respectively.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On October 18, 2017, the Company accepted and agreed to a Debt Purchase Agreement, whereby Emunah Funding LLC acquired $35,817 of debt from a Tri-Bridge Ventures LLC convertible note in exchange for $30,000. The note bears no interest, matures on October 18, 2018, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $30,000 due to this conversion feature. The debt discounts had a balance at March 31, 2018 of $16,521 and $0 at March 31, 2017. The Company recorded debt discount amortization expense of $13,479 during the year ended March 31, 2018 and $0 during the year ended March 31, 2017. The principal balance as of March 31, 2018 and 2017, was $30,000 and $0, respectively.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On October 20, 2017, the Company issued a convertible note to Emunah Funding LLC for $33,840, which includes $26,741 to settle outstanding accounts payable, transaction costs of $4,065, OID interest of $2,840, and cash consideration of $194. On November 6, 2017, the Company issued an Allonge to the convertible debt in the amount of $9,720. The Company received $7,960 in cash and recorded transaction fees of $1,000 and OID interest of $760. On November 30, 2017, the Company issued an Allonge to the convertible debt in the amount of $6,480. The Company received $5,000 in cash and recorded transaction fees of $1,000 and OID interest of $480. On January 11, 2018, the Company issued an Allonge to the convertible debt in the amount of $5,400. The Company received $5,000 in cash and recorded OID interest of $480. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on July 20, 2018, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $55,440 due to this conversion feature. The debt discounts had a balance at March 31, 2018 of $22,542 and $0 at March 31, 2017. The Company recorded debt discount amortization expense of $32,898 during the year ended March 31, 2018 and $0 during the year ended March 31, 2017. The principal balance as of March 31, 2018 and 2017, was $55,440 and $0, respectively.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Frank Trapp

On March 23, 2017, the Company transferred a promissory note with Frank Trapp into a convertible note for $14,945. The note bears interest at 5%, matured on December 31, 2017, and is convertible into convertible into common stock at 50% of the lowest trading price of the date of conversion. The Company recorded a debt discount from the derivative equal to $14,945 due to this conversion feature. On April 20, 2017, the note was acquired by Tri-Bridge Ventures LLC for $14,945. The note had accrued interest of $0 as of March 31, 2018 and $0 as of March 31,2017. The debt discounts had a balance of $0 as of March 31, 2018 and $14,523 as of March 31, 2017. The Company recorded debt discount amortization expense of $14,523 and $422 as of March 31, 2018 and 2017, respectively. The principal balance as of March 31, 2018 and 2017, was $0 and $14,945, respectively.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

GHS Investments, LLC

On February 7, 2017, the Company entered into a Settlement and Release Agreement, as well as an Exchange Convertible Promissory Note (collectively “Settlement Documents”), with GHS Investments, LLC (“GHS”).

On April 28, 2016, GHS entered into a Debt Assignment Agreement and a Convertible Promissory Note (collectively “Debt Assignment”) with Direct Capital Group, Inc., wherein, GHS purchased Fifteen Thousand Eight Hundred Eighty Six Dollars ($15,886) of interest that had accumulated on a Two Hundred Forty Thousand Dollars ($240,000) Note between Direct Capital Group, Inc. and Grid Petroleum Corporation, dating back to June 30, 2015, for consulting services provided by Direct Capital to Grid Petroleum.  GHS paid John Fullenkamp, the sole officer of Direct Capital Group, Inc., the purchase price of $15,886.

The Company did not receive any proceeds or compensation from the assignment of the $15,886 to GHS.  A Replacement Note (GHS Note #2) was entered between the Company and GHS; a conversion notice was presented to the Company on May 5, 2016, and GHS converted Nine Thousand Seven Hundred Forty Dollars ($9,740) into unrestricted common shares.  The share price on May 4, 2016, closed at $0.0002; the lowest intra-day trade during the time period set forth in the Replacement Note was $0.0001; and the shares were converted at the price of $0.00005 per share.  The remaining principal balance of the GHS Note #2 on May 5, 2016 was $6,146.

The next conversion request of Three Thousand Seven Hundred Dollars ($3,700) by GHS was denied by the Company; on August 7, 2016, the stock price was $0.12, there was an intra-day trade of $0.001 during the time period allowed under the terms of the GHS Note #2, and the request to convert shares at $0.0005.  The Company disputed the conversion, and interest and penalties were applied to the GHS Note #2, increasing the remaining $6,146 of the $15,886 GHS Note #2 to over $500,000. Following several months of negotiating, the Company and GHS agreed to reduce the GHS Note #2 to $150,000. GHS is prohibited from converting more than $14,000 per week and from selling more than $2,800 per day.

The note bears no interest, matured on April 1, 2015, and is convertible into common stock at 50% multiplied but the average of the 3 lowest closing market prices for the 10 days prior to the conversion date. The Company recorded a debt discount from the derivative equal to $150,000 due to this conversion feature. The debt discounts had a balance of $0 as of March 31, 2018 and $0 as of March 31, 2017. During the years ended March 31, 2018 and 2017, the principal amounts of $98,800 and $51,200, respectively, were converted into shares. The Company recorded debt discount amortization expense of $0 and $119,092 as of March 31, 2018 and 2017, respectively. As of March 31, 2018, the entire balance of the note has been converted to stock.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

GW Holdings Group, LLC

On October 13, 2015, the Company accepted and agreed to a Debt Purchase Agreement, whereby GW Holdings Group, LLC acquired $50,000 in principal and $10,411 of interest of a New Venture Attorneys convertible note in exchange for $60,411. The note bears interest at 8% per annum (increases to 24% per annum upon an event of default), matured on April 1, 2015, and is convertible into common stock at 50% multiplied by the average of the 3 lowest closing prices of the 10 trading days prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $60,411 due to this conversion feature. On April 27, 2016 and May 23, 2016, GW Holdings requested conversions which were not honored. Pursuant to the terms of the note, penalties of $2,000 per day per conversion were accrued as interest. The note had accrued interest of $2,770,200 as of March 31, 2018 and $996,814 as of March 31,2017. The debt discounts had a balance at March 31, 2018 of $0 and $0 at March 31, 2017. During the years ended March 31, 2018 and 2017, the principal and interest amounts of $0 and $4,153, respectively, were converted into shares. The Company recorded debt discount amortization expense of $0 during the year ended March 31, 2018 and $0 during the year ended March 31, 2017. The principal balance as of March 31, 2018 and 2017, was $42,500 and $42,500, respectively. This note currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

James Powell

On September 7, 2015, the Company issued a convertible note with the Company’s former President, James Powell for non-cash consideration for accrued fees of $150,875. The note bears interest at 8%, is due on demand, and is convertible into convertible into common stock at 50% of the lowest trading price for the 15 days prior to the date of conversion. The note had accrued interest of $30,952 as of March 31, 2018 and $0 as of March 31,2017. The principal balance as of March 31, 2018 and 2017, was $150,875 and $0, respectively.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Rockwell Capital Partners

On February 28, 2017, the Company entered into a Settlement Agreement with Rockwell Capital Partners, wherein Rockwell agreed to purchase a number of outstanding debts, in the total amount of $81,163, pursuant to a Claims Purchase Agreement and an order of the Court, following a Fairness Hearing under Section 3(a)(10) of the Securities Act of 1933 (the “Act”). Pursuant to the Order of the Court, shares of common stock shall be issued to Rockwell in exchange of the debt, and pursuant to the Order.

On March 1, 2017, an Order was entered by the Twelfth Judicial Circuit Court in and for Sarasota County, Florida, approving the Settlement Agreement and Stipulation regarding the sale of Shares under Section 3(a)(1) of the Act. As of March 31, 2017, Rockwell purchased $40,582 in outstanding debts, and the remaining settlement amount of $40,581 was cancelled.

The note bears no interest, is due on demand, and is convertible into convertible into common stock at 50% of the lowest closing price for the 15 days prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $40,582 due to this conversion feature. The debt discounts had a balance of $0 as of March 31, 2018 and $0 as of March 31, 2017. During the years ended March 31, 2018 and 2017, the principal amount of $19,782 and $20,800, respectively, were converted into shares. The Company recorded debt discount amortization expense of $0 and $40,582 as of March 31, 2018 and 2017, respectively. As of March 31, 2018, the entire balance of the note has been converted to stock.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Southridge Partners LP

On October 27, 2015, the Company accepted and agreed to a Debt Purchase Agreement, whereby Southridge Partners LP acquired $22,000 in principal and $8,730 of interest of two Direct Capital Group, Inc’s convertible notes in exchange for $30,730 to be paid in two tranches of $15,655 each. The second tranche was not paid, and during the year ended March 31, 2018 the note principal balance was reduced to $15,655 and interest by $3,282. The note bears interest at 8% per annum (increases to 22% per annum upon an event of default), matured on March 1, 2014, and is convertible into common stock at 50% of the lowest closing market price of the 15 trading days prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $15,655 due to this conversion feature. The note had accrued interest of $285 as of March 31, 2018 and $3,567 as of March 31,2017. The debt discounts had a balance at March 31, 2018 of $0 and $0 at March 31, 2017. The Company recorded debt discount amortization expense of $0 during the year ended March 31, 2018 and $0 during the year ended March 31, 2017. The principal balance as of March 31, 2018 and 2017, was $0 and $15,655, respectively. This note currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Syndication Capital, LLC

On December 31, 2012, the Company issued a convertible note with Syndication Capital, LLC, Inc. for non-cash consideration for unpaid consulting fees of $105,000. The note bears interest of 22%, matured on October 10, 2011 and is convertible into convertible into common stock at a fixed rate of $.0001. On August 4, 2013, Gel Properties, LLC acquired $100,000 of the note. The note had accrued interest of $18,853 as of March 31, 2018 and $17,753 as of March 31,2017. The principal balance as of March 31, 2018 and 2017, was $5,000 and $5,000, respectively. This note currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Tide Pool Ventures

On January 1, 2015, the Company accepted and agreed to a Debt Purchase Agreement, whereby Tide Pool Ventures Corporation acquired $360,000 in principal from a Direct Capital Group, Inc convertible note in exchange for $20,000. The note bears interest at 8% per annum (increases to 22% per annum upon an event of default), matured on March 1, 2014, and is convertible into common stock at 50% of the lowest trading price of the 15 trading days prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $360,000 due to this conversion feature. The note had accrued interest of $0 as of March 31, 2018 and $152,436 as of March 31,2017. The debt discounts had a balance at March 31, 2018 of $0 and $0 at March 31, 2017. The Company recorded debt discount amortization expense of $0 during the year ended March 31, 2018 and $0 during the year ended March 31, 2017. On February 7, 2018, the Company entered into a Settlement and Release Agreement with Tide Pool, whereby Tide Pool agreed to extinguish the principal balance of $348,000 and accrued interest of $217,133 for $10,000, to be issued in Series A preferred stock. The Company issued 5,587 Series A preferred stock at $1.79 per share, pursuant to the agreement, and recorded a gain of $555,633 on settlement of debt. The principal balance as of March 31, 2018 and 2017, was $0 and $348,500, respectively.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Tri-Bridge Ventures LLC

On January 19, 2017, the Company issued a convertible note to Tri-Bridge Ventures LLC for $25,000 for cash consideration. The note bears interest at 8%, matured on October 19, 2017, and is convertible into common stock at 57.5% of the volume weighted average price of the daily trading prices during the 20 day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $25,000 due to this conversion feature. The note had accrued interest of $1,306 as of March 31, 2018 and $389 as of March 31,2017. The debt discounts had a balance of $0 as of March 31, 2018 and $18,498 as of March 31, 2017. During the years ended March 31, 2018 and 2017, the principal amounts of $16,000 and $0, respectively, were converted into shares. The Company recorded debt discount amortization expense of $18,498 and $6,502 as of March 31, 2018 and 2017, respectively. The principal balance as of March 31, 2018 and 2017, was $9,000 and $25,000, respectively. This note currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On January 19, 2017, the Company issued a convertible note to Tri-Bridge Ventures LLC for $150,000 for non-cash consideration for an S-1 registration. The note bears interest at 8%, matured on October 19, 2017, and is convertible into common stock at 57.5% of the volume weighted average price of the daily trading prices during the 20 day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $150,000 due to this conversion feature. The note had accrued interest of $0 as of March 31, 2018 and $2,334 as of March 31,2017. The debt discounts had a balance of $0 as of March 31, 2018 and $110,989 as of March 31, 2017. The Company recorded debt discount amortization expense of $110,989 and $39,011 as of March 31, 2018 and 2017, respectively. On December 1, 2017, the Company and Tri-Bridge Ventures entered into a Settlement and Release Agreement and the principal balance of $150,000 and accrued interest of $10,389 was extinguished due to the terms of the agreement not materializing. The principal balance as of March 31, 2018 and 2017, was $0 and $150,000, respectively.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On April 21, 2017, the Company issued a convertible note to Tri-Bridge Ventures LLC for $20,000 for cash consideration. The note bears interest at 8%, matured on January 21, 2018, and is convertible into common stock at 57.5% of the volume weighted average price of the daily trading prices during the 20 day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $20,000 due to this conversion feature. The note had accrued interest of $0 as of March 31, 2018 and $0 as of March 31,2017. The debt discounts had a balance of $0 as of March 31, 2018 and $0 as of March 31, 2017. The Company recorded debt discount amortization expense of $20,000 and $0 as of March 31, 2018 and March 31, 2017, respectively. On October 18, 2017, the principal balance of $20,000 was reassigned to Emunah Funding LLC pursuant to a Debt Purchase Agreement in exchange for $25,000. The principal balance as of March 31, 2018 and March 31, 2017, was $0 and $0, respectively.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On April 20, 2017, the Company accepted and agreed to a Debt Purchase Agreement, whereby Tri-Bridge Ventures Corporation acquired $20,914 of the Carl Ambrose note and $14,945 of the Frank Trapp note in exchange for $35,817. The note bears interest at 8% per annum, matured on April 20, 2018, and is convertible into common stock at 57.5% of the volume weighted average price of the daily trading prices during the 20 day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $35,817 due to this conversion feature. The note had accrued interest of $0 as of March 31, 2018 and $0 as of March 31,2017. The debt discounts had a balance at March 31, 2018 of $0 and $0 at March 31, 2017. The Company recorded debt discount amortization expense of $35,817 during the year ended March 31, 2018 and $0 during the year ended March 31, 2017. On October 18, 2017, the principal balance of $35,817 was reassigned to Emunah Funding LLC pursuant to a Debt Purchase Agreement in exchange for $30,000, and the Company recorded a gain on settlement of debt of $5,859. The principal balance as of March 31, 2018 and 2017, was $0 and $0, respectively.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

V2IP, LLC

On May 31, 2016, the Company accepted and agreed to a Debt Purchase Agreement, whereby V2IP, LLC acquired $20,000 in accrued interest from a Direct Capital Group, Inc convertible note in exchange for $20,000. The note bears interest at 6% per annum (increases to 12% per annum upon an event of default), is due on demand, and is convertible into common stock at 50% of the lowest trading price of the 10 trading days prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $20,000 due to this conversion feature. The note had accrued interest of $1,129 as of March 31, 2018 and $529 as of March 31,2017. The debt discounts had a balance at March 31, 2018 of $0 and $0 at March 31, 2017. The Company recorded debt discount amortization expense of $0 during the year ended March 31, 2018 and $0 during the year ended March 31, 2017. The principal balance as of March 31, 2018 and 2017, was $10,000 and $10,000, respectively. This note currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

As of March 31, 2018, we have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities.

Convertible Note Conversions   

During the year ended March 31, 2018, the Company issued the following shares of common stock upon the conversions of portions of the Convertible Notes:

During the year ended March 31, 2017, the Company issued the following shares of common stock upon the conversions of portions of the Convertible Notes:

On October 1, 2017, Direct Capital Group, Inc. agreed to cancel two convertible notes in the principal amounts of $25,000 and $36,000, and $6,304 in accrued interest, in exchange for a Promissory Note in the amount of $61,000. The note bears no interest and is due on or before October 1, 2020. The Company recorded a gain of $6,304 in accrued interest and the derivative liability of $87,505 was revalued and settled to additional paid in capital.

During the year ended March 31, 2018, the Company valued the embedded conversion feature of the convertible notes, warrants, certain accounts payable and certain related party liabilities. The fair value was calculated at March 31, 2018 based on the Monte Carlo simulation method consistent with the terms of the related debt.

The following table represents the Company’s derivative liability activity for the embedded conversion features for the year ended March 31, 2018: