BrewBilt Brewing Co - Quarter Report: 2018 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2018

For the transition period from ______ to _______

Commission File Number 000-53276

SIMLATUS CORPORATION

(Name of small business issuer in its charter)

175 Joerschke Dr., Ste. A

Grass Valley, CA 95945

(Address of principal executive offices)

(530) 205-3437

(Registrant’s telephone number)

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 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

As of November 14, 2018, there were 2,914,799 shares of the registrant’s $0.00001 par value common stock issued and outstanding.

SIMLATUS CORP.

TABLE OF CONTENTS

Special Note Regarding Forward-Looking Statements

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Simlatus Corp. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Please note that throughout this Quarterly Report, and unless otherwise noted, the words “we,” “SIML,” “our,” “us,” the “Company,” refers to Simlatus Corp.

PART I - FINANCIAL INFORMATION

ITEM 1. 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

SIMLATUS CORP.
NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)

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.

Simlatus 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.

On October 23, 2018, the Company entered into a Memorandum of Understanding with Satel Group, Inc. to initiate a Merger between Satel Group Inc. and the Company.

The President of Satel Group Inc., Richard Hylen, and Chairman and CEO of Simlatus Corporation, Robert Stillwaugh have both agreed that it would be in the best interests of the shareholders to merge both companies.

Satel Group Inc. is a multi-million dollar revenue based company in telecommunication and has been in business since 2008. Based in San Francisco, Satel provides High Speed Internet, VoiSelect Digital Telephone, and DIRECTV™ for Multi-dwelling buildings including: Businesses, Apartments and Condominiums, and Residential Communities.

Simlatus will build specialized telecommunication and broadcast systems for Satel’s growing business model to expand its services.

On October 29, 2018, the Board of Directors dismissed Robert Stillwaugh as an officer and director, specifically as the Chief Executive Officer, Chairman of the Board, and Corporate (President) of the Company effective November 1, 2018. Effective November 1, 2018, Mr. Stillwaugh has a new revised Employment Agreement which appoints him as President of Simlatus, a non-director/officer position which includes returning to Treasury 250 Preferred Series B Control Shares, and an annual salary of $45,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion.

On October 29, 2018, the Board of Directors dismissed Mike Schatz as an officer and director, specifically as the Chief Operations Officer, Director, Secretary and Treasurer of the Company effective November 1, 2018. Effective November 1, 2018, Mr. Schatz has a new revised Employment Agreement which appoints him as the Vice President of Simlatus, a non-director/officer position, which includes returning to Treasury 250 Preferred Series B Control Shares, and an annual salary of $45,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion.

On October 29, 2018, the Board of Directors appointed Richard N. Hylen as the new Chief Executive Officer, Chairman of the Board, and President, Secretary, and Treasurer of the Company effective November 1, 2018. Richard has been provided with an Employment Agreement that includes the issuance of 500 Preferred Series B Control Shares, and an annual salary of $120,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion.

Mr. Hylen is 72 years old. As the Founder of Satel Inc., the Managing Director of Turner Broadcasting Far East LTD, and a Senior Executive of Viacom’s San Francisco cable company, Richard has over 35 years of experience providing video and Internet using the most advanced technologies including: cable, fiber, satellite, wireless and CAT5 not only domestically, but to over 50 countries worldwide. His skill set encompasses successfully negotiating complicated licensing agreements with governmental entities, creating joint venture partnerships, developing strategic distribution relationships, financing, designing, installing and managing advanced technologies to provide consumers with video and Internet services. Hylen used his extensive corporate management expertise combined with his technical knowledge to create Satel, recognized as one of the nation’s largest providers of DirecTV to high rise buildings in major metropolitan markets.

Financial Statement Presentation

The accompanying unaudited Condensed Financial Statements have been prepared in accordance with the instructions to interim financial reporting as prescribed by the Securities and Exchange Commission (the “SEC”). The results for the interim periods are not necessarily indicative of results for the entire year. These interim financial statements do not include all disclosures required by U.S. generally accepted accounting principles (“GAAP”), and should be read in conjunction with the consolidated financial statements and notes thereto filed with the SEC in our Annual Report on Form 10-K for the fiscal year ended March 31, 2018. In the opinion of management, the unaudited Condensed Financial Statements contained in this report include all known accruals and adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods reported herein. Any such adjustments are of a normal recurring nature.

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

Effective April 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

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 September 30, 2018 and March 31, 2018 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 8). Diluted earnings (loss) per share is equal to the basic per share for the three and six months ended September 30, 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. As of September 30, 2018 and March 31, 2018, 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, as $2,129 and $1,435, 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 September 30, 2018 and March 31, 2018 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 September 30, 2018 and March 31, 2018, 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, 2017 and 2018 which, are still open for examination.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09 regarding ASC Topic 606, “Revenue from Contracts with Customers.” ASU 2014-09 provides principles for recognizing revenue to depict 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 August 2015, the FASB issued ASU 2015-14 to defer the effective date by one year with early adoption permitted as of the original effective date. ASU 2014-09 will be effective for our fiscal year beginning April 1, 2018. In addition, the FASB issued ASU 2016-08, ASU 2016-10, and ASU 2016-12 in March 2016, April 2016, and May 2016, respectively, to help provide interpretive clarifications on the new guidance in ASC Topic 606. The Company is currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact 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.

Effective April 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of September 30, 2018, the Company has an accumulated deficit of $12,873,722 since its inception and working capital deficit of $13,741,227, 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.

As of September 30, 2018 and the year ended March 31, 2018, 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 $8,576 as of September 30, 2018 and $8,260 as of March 31,2018. The debt discounts had a balance at September 30, 2018 of $0 and $0 at March 31, 2018. The principal balance as of September 30, 2018 and March 31, 2018, was $2,625 and $2,625, 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 September 30, 2018 and $0 as of March 31,2018. The debt discounts had a balance of $0 at September 30, 2018 and $0 at March 31, 2018.

On May 12, 2018, the Company entered into a Debt Settlement Agreement with Asher Enterprises, Inc. to settle the outstanding debt of $13,000 in exchange for a cash payment of $26,000, resulting in a loss on settlement of debt of $13,000. As of September 30, 2018 and March 31, 2018, the note had a balance of $0 and $13,000, 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.

Auctus Fund LLC

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 $209,752 as of September 30, 2018 and $204,127 as of March 31,2018. The debt discounts had a balance of $0 as of September 30, 2018 and $0 as of March 31, 2018. The Company recorded debt discount amortization expense of $0 and $8,209 as of September 30, 2018 and March 31, 2018, respectively. The principal balance as of September 30, 2018 and March 31, 2018, was $46,750 and $46,750, 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.

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 $217,008 as of September 30, 2018 and $213,094 as of March 31,2018. The debt discounts had a balance of $0 as of September 30, 2018 and $6,679 as of March 31, 2018. The Company recorded debt discount amortization expense of $6,679 and $40,071 as of September 30, 2018 and March 31, 2018, respectively. The principal balance as of September 30, 2018 and March 31, 2018, was $46,750 and $46,750, 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.

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 $9,719 as of September 30, 2018 and $7,703 as of March 31,2018. The debt discounts had a balance of $0 at September 30, 2018 and $0 at March 31, 2018. The Company recorded debt discount amortization expense of $0 and $7,269 as of September 30, 2018 and March 31, 2018, respectively. The principal balance as of September 30, 2018 and March 31, 2018, was $80,400 and $80,400, 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.

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 $59,214 as of September 30, 2018 and $26,415 as of March 31,2018. The debt discounts had a balance of $0 as of September 30, 2018 and $0 as of March 31, 2018. During the year ended March 31, 2018, the principal amount of $12,754 was converted into shares. The Company recorded debt discount amortization expense of $0 and $21,384 as of September 30, 2018 and March 31, 2018, respectively. The principal balance as of September 30, 2018 and March 31, 2018, was $272,576 and $272,576, 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.

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 September 30, 2018 of $5,425 and $60,575 at March 31, 2017. The Company recorded debt discount amortization expense of $55,151 during the six months ended September 30, 2018 and $49,425 during the year ended March 31, 2018. The principal balance as of September 30, 2018 and March 31, 2018, was $110,000 and $110,000, 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 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 September 30, 2018 of $1,233 and $13,767 at March 31, 2017. During the year ended March 31, 2018 the principal amount of $5,000 was converted into shares. The Company recorded debt discount amortization expense of $12,534 during the six months ended September 30, 2018 and $11,233 during the year ended March 31, 2018. The principal balance as of September 30, 2018 and March 31, 2018, was $20,000 and $20,000 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 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 September 30, 2018 of $1,479 and $16,521 at March 31, 2018. The Company recorded debt discount amortization expense of $15,041 during the six months ended September 30, 2018 and $13,479 during the year ended March 31, 2018. The principal balance as of September 30, 2018 and March 31, 2018, was $30,000 and $30,000, 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 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 note had accrued interest of $5,749 as of September 30, 2018 and $1,776 as of March 31,2018. 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 September 30, 2018 of $0 and $22,542 at March 31, 2018. The Company recorded debt discount amortization expense of $22,542 during the six months ended September 30, 2018 and $32,898 during the year ended March 31, 2018. The principal balance as of September 30, 2018 and March 31, 2018, was $55,440 and $55,440, 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.

On May 15, 2018, the Company issued a convertible note to Emunah Funding LLC for $37,778, which includes $26,000 to settle the convertible note with Asher Enterprises, $8,000 to settle outstanding accounts payable, and OID interest of $3,778. The note bears interest of 10% (increases to 24% per annum upon an event of default), matures on May 15, 2019, and is convertible into common stock at 60% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The note had accrued interest of $1,428 as of September 30, 2018 and $0 as of March 31, 2018. The Company recorded a debt discount from the derivative equal to $26,964 due to this conversion feature. The debt discounts had a balance at September 30, 2018 of $19,120 and $0 at March 31, 2018. The Company recorded debt discount amortization expense of $11,623 during the six months ended September 30, 2018 and $0 during the year ended March 31, 2018. The principal balance as of September 30, 2018 and March 31, 2018, was $37,778 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.

Fourth Man LLC

On July 3, 2018, the Company issued a convertible note to Fourth Man LLC for $24,200, which includes $20,762 to settle outstanding accounts payable, OID interest of $2,200, and cash consideration of $1,238. On July 17, 2018, the Company issued an Allonge to the convertible debt in the amount of $8,470, which includes $7,700 to settle outstanding accounts payable and OID interest of $700. On August 22, 2018, the Company issued an Allonge to the convertible debt in the amount of $7,700, which includes $7,000 to settle outstanding accounts payable and OID interest of $700. The note bears interest of 10% (increases to 24% per annum upon an event of default), matures on July 3, 2019, and is convertible into common stock at 60% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The note had accrued interest of $846 as of September 30, 2018 and $0 as of March 31,2018. The Company recorded a debt discount from the derivative equal to $40,370 due to this conversion feature. The debt discounts had a balance at September 30, 2018 of $33,029 and $0 at March 31, 2018. The Company recorded debt discount amortization expense of $11,011 during the six months ended September 30, 2018 and $0 during the year ended March 31, 2018. The principal balance as of September 30, 2018 and March 31, 2018, was $40,370 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.

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 $3,507,321 as of September 30, 2018 and $2,770,200 as of March 31,2018. The debt discounts had a balance at September 30, 2018 of $0 and $0 at March 31, 2018. The principal balance as of September 30, 2018 and March 31, 2018, was $42,500 and $42,500, 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.

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 $37,005 as of September 30, 2018 and $30,952 as of March 31,2018. The principal balance as of September 30, 2018 and March 31, 2018 was $150,875 and $150,875, 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.

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 $19,406 as of September 30, 2018 and $18,855 as of March 31,2018. The principal balance as of September 30, 2018 and March 31, 2018, was $5,000 and $5,000, 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.

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 $1,667 as of September 30, 2018 and $1,306 as of March 31,2018. The debt discounts had a balance of $0 as of September 30, 2018 and $0 as of March 31, 2018. During the year ended March 31, 2018, the principal amount of $16,000 was converted into shares. The Company recorded debt discount amortization expense of $0 and $18,498 as of September 30, 2018 and March 31, 2018, respectively. The principal balance as of September 30, 2018 and March 31, 2018, was $9,000 and $9,000, 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.

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 $1,730 as of September 30, 2018 and $1,129 as of March 31,2018. The debt discounts had a balance at September 30, 2018 of $0 and $0 at March 31, 2018. The principal balance as of September 30, 2018 and March 31, 2018, was $10,000 and $10,000, 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.

As of September 30, 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 six months ended September 30, 2018, the Company issued no shares of common stock upon the conversion of portions of the Convertible Notes.

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:

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.

As of September 30, 2018, the Company revalued the embedded conversion feature of the Convertible Notes, warrants and stock payables. The fair values were calculated based on the Monte Carlo simulation method consistent with the terms of the related debt.

A summary of the derivative liability balance as of September 30, 2018, is as follows:

Convertible Notes

The fair value at the commitment date for the convertible notes and the revaluation dates for the Company’s derivative liabilities were based upon the following management assumptions as of September 30, 2018:

Warrants

On October 20, 2017, the Company executed a Common Stock Purchase Warrant for 35,227 shares (52,840,909 shares pre-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.0005 per share and expire on October 20, 2022.

On November 6, 2017, the Company executed a Common Stock Purchase Warrant for 10,225 shares (15,338,160 shares pre-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.0005 per share and expire on November 6, 2022.

On November 30, 2017, the Company executed a Common Stock Purchase Warrant for 6,817 shares (10,225,440 shares pre-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.0005 per share and expire on November 30, 2022.

On January 11, 2018, the Company executed a Common Stock Purchase Warrant for 5.681 shares (8,521,200 shares pre-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.0005 per share and expire on January 11, 2023.

On May 15, 2018, the Company executed a Common Stock Purchase Warrant for 26,667 shares (40,000,000 shares pre-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.0005 per share and expire on May 15, 2023.

On July 3, 2018, the Company executed a Common Stock Purchase Warrant for 32,267 shares (48,400,000 shares pre-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.0005 per share and expire on July 3, 2023.

On July 17, 2018, the Company executed a Common Stock Purchase Warrant for 11,293 shares (16,940,000 shares pre-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.0005 per share and expire on July 17, 2023.

On August 22, 2018, the Company executed a Common Stock Purchase Warrant for 10,267 shares (15,400,000 shares pre-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.0005 per share and expire on August 22, 2023.

The Company evaluated all outstanding warrants to determine whether these instruments may be tainted. All warrants outstanding were considered tainted. The Company valued the embedded derivatives within the warrants based on the Monte Carlo simulation.

The fair value at the inception date for the warrants and the revaluation dates were based upon the following management assumptions:

Stock Payable

During the year ended March 31, 2018, the Company reclassified stock payables due to related parties of $2,791,250 to derivative liabilities, due to the company having a tainted equity environment. The payables to be issued in stock are at 100% of the lowest closing market price with a 15 day look back. The effective discount to the stock at March 31, 2018 due to the 100% of the lowest closing market price of the previous 15 days using a 6-month average was $0, and therefore the value is equal to the face amount.

During the six months ended September 30, 2018, the Company recorded $15,000 in stock payables due to the conversion of accounts payable to stock payable, which were derivatives due to their tainted equity environment.

The Company is periodically advanced noninterest bearing operating funds from related parties. The advances are due on demand and unsecured. During the six months ended September 30, 2018, the Company advanced $31,519 to related parties. As of September 30, 2018 and March 31, 2018 the Company owed related parties $158,012 and $126,494, respectively. During the six months ended September 30, 2018 and the year ended March 31, 2018, the Company recorded imputed interest of $10,658 and $13,257, respectively, to the statement of operations with a corresponding increase to additional paid in capital.

On January 25, 2011, the Company filed an amendment to its Nevada Certificate of Designation to create two classes of Preferred Stock, Series A and Series B, with a par value of $0.001. Each class has 10,000,000 shares authorized.

On July 1, 2015, the Company’s Board of Directors authorized the creation of shares of Series B Voting Preferred Stock and on July 27, 2015 a Certificate of Designation was filed with the Nevada Secretary of State. The holder of the shares of the Series B Voting Preferred Stock has the right to vote those shares of the Series B Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series B Voting Preferred Stock is equal to and counted as 4 times the votes of all of the shares of the Company’s (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company regarding each and every matter submitted to the shareholders of the Company for approval.

On January 3, 2017, the Company filed an Amendment to Certificate of Designation with the Nevada Secretary of State defining the rights and preferences of the Series A Preferred shares. Series A Preferred stock shall be convertible into common shares at the rate of the closing market price on the day of the conversion notice equal to the dollar amount of the value of the Series A shares, and holders shall have no voting rights on corporate matters, unless and until they convert their Series A shares into Common Shares, at which time they will have the same voting rights as all Common Shareholders have; their consent shall not be required for taking any corporate action.

On June 1, 2017, the Company issued 536,351 Series A Preferred shares valued at $960,068 to Gary Tilden, a former officer and director, which reduced liabilities owed to him of $819,460, and recorded a loss on conversion of $140,608. The value of the stock is based on the closing market price of the equivalent common stock conversion value on the date of the settlement agreement.

On August 21, 2017, the Company retired 250 Series B Voting Preferred shares issued and 81,061 common shares issued to Gary Tilden, in accordance with his resignation arrangement. Additionally, the Company issued Mr. Tilden 747,208 Series A Preferred shares, with a value of $1,337,499, thereby recording a loss on conversion of $1,325,340. The value of the stock is based on the closing market price of the equivalent common stock conversion value on the date of the settlement agreement.

On February 7, 2018, the Company issued 5,587 Series A Preferred stock at $1.79 per share, pursuant to a debt settlement agreement with a convertible note holder. The note holder 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 recorded a gain of $555,633 on settlement of debt, a gain on derivative liability of $501,506, and reclassed $161,343 in derivative liabilities to additional paid in capital. The value of the stock is based on the closing market price of the equivalent common stock conversion value on the date of the settlement agreement.

During the year ended March 31, 2018, the Company also retired 250 Series B Voting Preferred shares issued to Donna Murtaugh. Ms. Murtaugh also sold 174,581 Series A Preferred shares to a new shareholder, of which 12,788 Series A Preferred shares were converted into 127,888 common shares. Both resulted in $0 due to the value being within the terms of the agreement at $0 per share.

As of September 30, 2018, 10,000,000 Series A Preferred shares and 10,000,000 Series B Preferred shares were authorized, of which 3,489,610 Series A shares were issued and outstanding, (3,489,610 shares as of March 31, 2018) and 500 Series B shares were issued and outstanding (500 shares as of March 31, 2018).

On June 15, 2016, the Company approved the authorization of a 1 for 1,000 reverse stock split of the Company’s outstanding shares of common stock, which was effective on July 22, 2016. The financial statements have been retroactively adjusted to take this into account for all periods presented.

On August 29, 2016, the Company filed a Certificate of Amendment to reduce the amount of authorized common shares to 163,000,000 shares, par value of $0.00001.

On November 14, 2016, the Company filed a Certificate of Amendment to increase the number of authorized common shares to 1,500,000,000 with a par value of $0.00001.

On December 8, 2016, the Company filed a Certificate of Amendment to increase the number of authorized common shares to 3,000,000,000 with a par value of $0.00001.

On January 26, 2017, the Company filed a Certificate of Amendment with the State of Nevada in order to increase the number of authorized shares of Common Stock. The number of authorized common stock the Company shall have the authority to issue is 7,000,000,000; par value $0.00001 per share.

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.

On August 21, 2017, the Company retired 250 Series B Voting Preferred shares and 81,061 common shares issued to Gary Tilden, in accordance with his resignation arrangement. Additionally, the Company issued Mr. Tilden 747,208 Series A Preferred shares, with a value of $1,337,499, thereby recording a loss on conversion of $1,325,340. The value of the stock is based on the closing market price of the equivalent common stock conversion value on the date of the settlement agreement.

On October 31, 2017, the Company approved the authorization of a 1 for 1,500 reverse stock split of the Company’s outstanding shares of common stock, which was effective on October 19, 2018. The Company’s financial statements have been retroactively adjusted for this stock split for all periods presented.

On November 1, 2017, the Company filed a Certificate of Amendment with the Secretary of State in Nevada, to amendment its Articles of Incorporation pursuant to the reverse split and to reduce the number of authorized common shares to 900,000,000 having a par value of $0.00001. Any fractional shares which results from that reverse stock split will be rounded up to the next whole share. All common share amounts and per share amounts in the financial statements reflect the one-for-fifteen hundred reverse stock split.

During the year ended March 31, 2018, 127,888 common shares were issued in exchange for 12,788 shares of Series A Preferred shares. No gain or loss was recorded due to the conversion occurring within the terms of the 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 issuance extinguished $722,055 worth of derivative liabilities and $201,809 was recorded as a loss on settlement of debt.

As of September 30, 2018, 900,000,000 common shares, par value $0.00001, were authorized, of which 2,914,799 shares were issued and outstanding (2,914,799 shares as of March 31, 2018).

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

Operating loss carry-forwards generated from inception through September 30, 2018 of approximately $6,102,552 will begin to expire in 2034. The Company applies a statutory income tax rate of 21%. Accordingly, deferred tax assets related to net operating loss carry-forwards total approximately $1,281,536 at September 30, 2018.

On June 27, 2016, the Company entered into a Consulting Agreement with Axeman Capital LLC (formerly Channel Sales & Consulting, LLC). The Company has agreed to pay Axeman Capital (“Axeman”) $3,000 per month for the first two months, and $4,000 per month for a period of one year. Axeman will also be paid a 10% commission on all gross sales generated through a licensed dealer and 30% commission on non-licensed dealers. If within the first twelve months of the Agreement, Axeman generates gross sales above $2,000,000, the Company will pay an additional 5% commission on gross sales, either in cash or restricted common stock. On October 12, 2017, the Company accepted a letter from Axeman agreeing to not accept a bonus fee of $100,000 in restricted common shares of the Company.

On June 15, 2018, the Company entered into a Debt Settlement Agreement (“Agreement”) with Axeman regarding the original contract dated June 27, 2016. The Agreement settles all outstanding debt owed to Axeman as of May 30, 2018, which includes unpaid monthly retainers and commissions of $28,103 and a $100,000 bonus fee, which the Company agreed to reinstate pursuant to the terms of the Agreement. The Company has agreed to settle this debt in full, in the amount of $140,000. The company has agreed to issue 78,212 Series A shares in value of $1.79 per share for the total value of $140,000 and this amount was accrued as of March 31, 2018 and June 30, 2018. All contracts have been canceled with Axeman, and the Company has authorized the Transfer Agent to issue said shares in the name of Axeman Capital, LLC. As of the date of this filing, the shares have not been issued.

On February 1, 2017, the Company entered into a standard office lease for approximately 1,700 square feet of office space at 175 Joerschke Drive, Suite A, Grass Valley, CA 95945. The lease has a term of 1 year, from February 1, 2017 through January 31, 2018, with a monthly rent of $1,400. On February 1, 2018, the Company entered into a month-to-month lease with a monthly rent of $1,400. Rental expenses incurred for this operating lease during the years ended March 31, 2018 and 2017 were $16,800 and $16,800 respectively.

On October 23, 2018, the Company entered into a Memorandum of Understanding with Satel Group, Inc. to initiate a Merger between Satel Group Inc. and the Company. The President of Satel Group Inc., Richard Hylen, and Chairman and CEO of Simlatus Corporation, Robert Stillwaugh has both agreed that it would be in the best interests of the shareholders to merge both companies.

On October 26, 2018, the Company issued 488,827 Series A Preferred shares at $1.79 per share to Donna Murtaugh, to settle liabilities of $875,000 owed to her pursuant to the Asset Purchase Agreement dated March 9, 2016.

On October 29, 2018, the Board of Directors dismissed Robert Stillwaugh as an officer and director, specifically as the Chief Executive Officer, Chairman of the Board, and Corporate (President) of the Company effective November 1, 2018. Effective November 1, 2018, Mr. Stillwaugh has a new revised Employment Agreement which appoints him as President of Simlatus, a non-director/officer position which includes returning to Treasury 250 Preferred Series B Control Shares, and an annual salary of $45,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion.

On October 29, 2018, the Board of Directors dismissed Mike Schatz as an officer and director, specifically as the Chief Operations Officer, Director, Secretary and Treasurer of the Company effective November 1, 2018. Effective November 1, 2018, Mr. Schatz has a new revised Employment Agreement which appoints him as the Vice President of Simlatus, a non-director/officer position, which includes returning to Treasury 250 Preferred Series B Control Shares, and an annual salary of $45,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion.

On October 29, 2018, the Board of Directors appointed Richard N. Hylen as the new Chief Executive Officer, Chairman of the Board, and President, Secretary, and Treasurer of the Company effective November 1, 2018. Richard has been provided with an Employment Agreement that includes the issuance of 500 Preferred Series B Control Shares, and an annual salary of $120,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion.

On October 31, 2018, the Company issued a convertible note to Emunah Funding LLC for $27,778, which includes $24,000 in cash paid to the company, and transaction costs of $3,778. The note bears interest of 10% (increases to 24% per annum upon an event of default), matures on October 31, 2019.

On October 31, 2018, the Company executed a Common Stock Purchase Warrant for 3,026,420 shares. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.07 per share and expire on October 31, 2023.

The Company has evaluated subsequent events pursuant to ASC Topic 855 and has determined that there are no additional subsequent events to disclose.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our 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 those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2018 Compared with Three Months Ended September 30, 2017

Revenues:

The Company’s revenues were $13,216 for the three months ended September 30, 2018 compared to $3,600 for the three months ended September 30, 2017. The increase in revenue was due to an increase in audio and video broadcasting product orders.

Cost of Sales:

The Company’s cost of materials was $2,997 for the three months ended September 30, 2018, compared to $3,659 for the three months ended September 30, 2017. The decrease was due to a decrease in labor costs to assemble finished products required to fulfill customer orders.

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 three months ended September 30, 2018, and September 30, 2017, were $148,707 and $210,186, respectively. The decrease was primarily attributable to a decrease in professional fees.

Other Income (Expense):

Other income (expense) for the three months ended September 30, 2018, and September 30, 2017, was $(889,725) and $(1,084,453), 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.

Net Loss:

Net loss for the three months ended September 30, 2018, was $1,028,213 compared with a net loss of $1,294.698 for the three months ended September 30, 2017. The decreased net loss can be explained by the changes in fair value of derivative liabilities and a decrease in professional fees.

Six Months Ended September 30, 2018 Compared with Six Months Ended September 30, 2017

Revenues:

The Company’s revenues were $21,244 for the six months ended September 30, 2018 compared to $11,951 for the six months ended September 30, 2017. The increase in revenue was due to an increase in audio and video broadcasting product orders.

Cost of Sales:

The Company’s cost of materials was $5,567 for the six months ended September 30, 2018, compared to $10,276 for the six months ended September 30, 2017. The decrease was due to a decrease in labor costs to assemble finished products required to fulfill customer orders.

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 six months ended September 30, 2018, and September 30, 2017, were $280,984 and $460,589, respectively. The decrease was primarily attributable to a decrease in salary and wages and professional fees.

Other Income (Expense):

Other income (expense) for the six months ended September 30, 2018, and September 30, 2017, was $(1,704,027) and $(864,984), 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 increase primarily resulted from the fluctuation of the Company’s stock price during the six months ended September 30, 2017 which impacted the valuation of the derivative liabilities.

Net Loss:

Net loss for the six months ended September 30, 2018, was $1,969,334 compared with a net loss of $1,323,898 for the six months ended September 30, 2017. The increased net loss can be explained by the changes in fair value of derivative liabilities.

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 $(11,794,603) at March 31, 2018 to $(13,741,227) at September 30, 2018.

During the six months ended September 30, 2018, cash used in operating activities was $1,060 compared to $89,506 for the six months ended September 30, 2017. The increase in the cash used in operating activities is primarily attributed to the loss in the fair value of derivative liabilities and accrued interest.

During the six months ended September 30, 2018 cash used in investing activities was $0 compared to $0 for the six months ended September 30, 2017.

During the six months ended September 30, 2018, cash from financing activity was $1,238 compared to $93,597 for the six months ended September 30, 2017. The decrease in cash from financing activity primarily resulted from a decrease in the proceeds from convertible notes during the six months ended September 30, 2018.

As of September 30, 2018, the Company had a cash balance and asset total of $2,609 and $5,721 respectively, compared with $2,431 and $8,626 of cash and total assets, respectively, as of March 31, 2018. The decrease in assets was due to a decrease in accounts receivable.

As of September 30, 2018, the Company had total liabilities of $13,807,948 compared with $11,864,229 as of March 31, 2018. The increase in total liabilities was primarily attributed to an increase 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 September 30, 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 2014-09 regarding ASC Topic 606, “Revenue from Contracts with Customers.” ASU 2014-09 provides principles for recognizing revenue to depict 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 August 2015, the FASB issued ASU 2015-14 to defer the effective date by one year with early adoption permitted as of the original effective date. ASU 2014-09 will be effective for our fiscal year beginning April 1, 2018. In addition, the FASB issued ASU 2016-08, ASU 2016-10, and ASU 2016-12 in March 2016, April 2016, and May 2016, respectively, to help provide interpretive clarifications on the new guidance in ASC Topic 606. The Company is currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.

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 consolidated 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 consolidated 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our Company’s officers, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our Company’s officers, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2018. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses in our internal control over financial reporting identified in our Annual Report on Form 10-K for the year ended March 31, 2018, that was filed with the SEC on September 24, 2018, the Company’s officers concluded that our disclosure controls and procedures are ineffective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act, during the quarter ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II- OTHER INFORMATION

ITEM 1. 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 1A. RISK FACTORS

Our Annual Report on Form 10-K for the fiscal year ended March 31, 2018 includes a detailed discussion of our risk factors.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.