flooidCX Corp. - Quarter Report: 2023 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarter ended March 31, 2023

OR

For the transition period from ______________ to _______________

Commission File No. 000-55965

(702) 323-6455

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

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 ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

As of May 9, 2023, there were 2,020,871 shares of our common stock issued and outstanding, par value $0.001.

TABLE OF CONTENTS

Cautionary Note Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements”. These forward-looking statements, including without limitation forward-looking statements made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” involve risks and uncertainties. Any statements contained in this Quarterly Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements as to our future operating results; plans for the marketing of our services; future economic conditions; the effect of our market and product development efforts; and expectations or plans relating to the implementation or realization of our strategic goals and future growth, including through potential future acquisitions. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, use of cash and other measures of financial performance, as well as statements relating to future dividend payments. Other forward-looking statements may be identified through the use of words such as “believes,” “anticipates,” “may,” “should,” “will,” “plans,” “projects,” “expects,” “expectations,” “estimates,” “predicts,” “targets,” “forecasts,” “strategy,” and other words of similar meaning in connection with the discussion of future operating or financial performance. These statements are based on current expectations, estimates and projections about the industries in which we operate, and the beliefs and assumptions made by management. Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. Accordingly, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Investors, therefore, are cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Readers should refer to the discussions under “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended February 28, 2022 concerning certain factors that could cause our actual results to differ materially from the results anticipated in such forward-looking statements. These Risk Factors are hereby incorporated by reference into this Quarterly Report.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FLOOIDCX CORP.

Unaudited Interim Condensed Consolidated Financial Statements

Three Months Ended March 31, 2023

(Expressed in US dollars)

(unaudited)

FLOOIDCX CORP.

Unaudited Interim Condensed Consolidated Balance Sheets

(Expressed in U.S. dollars)

(The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements)

FLOOIDCX CORP.

Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss

(Expressed in U.S. dollars)

(Unaudited)

(The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements)

FLOOIDCX CORP.

(The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements)

FLOOIDCX CORP.

Unaudited Interim Condensed Consolidated Statements of Cash Flows

(Expressed in U.S. dollars)

(Unaudited)

(The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements)

FLOOIDCX CORP.

Notes to the Unaudited Condensed Consolidated Financial Statements

Three Months Ended March 31, 2023 and 2022

(Expressed in U.S. Dollars)

1. Nature of Operations and Continuance of Business

FlooidCX Corp. (formerly Gripevine, Inc. and Baixo Relocation Services, Inc.) (the “Company”) was incorporated in the state of Nevada on January 7, 2014. Prior to the split-off of the MB Holdings, Inc. (“MB Holdings”), subsidiary, the Company was in the business of developing and building an online resolution platform.

Effective June 27, 2022, the Company entered into a split-off agreement with its President and majority shareholder at the time, and MP Special Purpose Corporation (“MP Special”). As part of the agreement the Company transferred its equity interest in MB Holdings, Inc., to the majority shareholder, and the majority shareholder transferred his equity interest in the Company to MP Special in exchange for $600,000. In addition, as part of the transaction, the parties agreed that certain specified debt would remain or be transferred to Flooidcx Corp., and that other specific debt would remain or be transferred to MBE Holdings. Because the Company’s majority shareholder was involved in this transaction, it has been treated as common control transaction, and therefore, the derecognition of the net liabilities of MB Holdings were accounted for as an equity transaction rather than a gain. After the split-off of MBE Holdings, the Company had no operating activities. However, in March 2023, the Company entered into a merger agreement with Quantum Energy, Inc., (See Note 7).

These condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, creditors, and related parties, and the ability of the Company to obtain necessary equity financing to continue operations, and ultimately the attainment of profitable operations. As of March 31, 2023, the Company did not have any operations generating revenue and had stockholders’ deficit of $4.0 million, and was in default of certain loans payable. (refer to Note 3). These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These unaudited interim condensed consolidated financial statements (the “condensed consolidated financial statements”) do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

On March 29, 2023 FlooidCX Corp. (“FLCX”), a Nevada corporation entered into An Agreement and Plan of Merger (the “Agreement”) with Quantum Energy, Inc., a Nevada corporation (“QREE”). (See Note 7)

2. Significant Accounting Policies

(a) Basis of Presentation

These condensed consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars. These consolidated financial statements include the accounts of the Company and the following entities: Resolution 1, Inc. a wholly-owned subsidiary, and MBE Holdings, Inc., an entity that was wholly-owned subsidiary until the date of the split-off. After the split-off MBE Holdings, Inc. was derecognized in the Company’s financial statements, and the activity of MBE Holdings, Inc. after the date of the split-off is not included in the accompanying financial statements.

The condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of the condenses consolidated financial statements have been included. Such adjustments are of a normal, recurring nature. The condensed consolidated financial statements and the accompanying notes, are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and do not contain information included in the Company’s Annual Report on Form 10-KT for the period ended December 31, 2022. Therefore, the interim condensed consolidated financial statements should be read in conjunction with that Annual Report on Form 10-KT.

All inter-company balances and transactions have been eliminated.

(b) Discontinued Operations 

In accordance with ASC No. 205-20, Discontinued Operations, for all periods presented, the results of operations and related balance sheet items associated with the MB Holdings are reported in discontinued operations in the accompanying consolidated statements of operations. See Note 6 – Discontinued Operations for further details.

(c) Use of Estimates 

The preparation of these consolidated 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 and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. 

(d) Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The new standard is effective for fiscal years and interim periods within those years beginning after December 31, 2022.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its condensed consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

(e) Net Loss per Share

Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. Potentially dilutive shares outstanding as of March 31, 2023 and December 31, 2022 consist of 127,450,000 common stock equivalents related to convertible Preferred series A and B stock.

(f) Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar. The functional currency of MBE and Resolution 1 is the Canadian dollar. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets, liabilities, and items recorded in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

3. Notes Payable & Loans - Related Parties

At March 31, 2023 and December 31, 2022, the Company owed $3,816,076 and $3,728,586 to related parties, respectively, which are unsecured, non-interest bearing and due on demand. The amounts due are notes that are held by Quantum Energy, Inc. (“Quantum”) (see Note 7), a company with common board members, and also another company that is controlled by one of Quantum’s board members.

At March 31, 2023 and December 31, 2022, the Company owed $144,057 and $143,914, respectively, to a related party, which is unsecured, bears interest at the default rate of 12% and is due on demand.

4. Other Related Party Transactions

During the three months ended March 31, 2023 and 2022, the Company incurred $nil (2022 – $47,196) in research and development fees paid to the President of the Company.

During the three months ended March 31, 2023 and 2022, the Company issued 915,000 Preferred Series B and 915,000 Preferred Series C shares with a fair value of  $1,006,720 (2021 – $-nil-) to its incoming management and board as part of the Agreement. Such estimate of fair value is based on the super voting rights of the Series C and  the equivalent number of common shares of Series B, which has been recorded as contra equity as such relate to transactions with the Company's officer and other shareholders. If the Merger closes, such consideration will be accounted for in the transaction. As of the filing date of this Form 10-Q, the Company expects the Merger to close in Q3 2023.

5. Equity

Preferred Stock

The preferred stock contains certain rights and preferences as detailed below: There were 1,000,000 shares of Series A outstanding at March 31, 2023 and December 31, 2022.

Preferred A:

In connection with the potential merger (See Note 7), the company established additional series of preferred stock, summarized as follows:

Preferred B: (1,000,000 shares authorized):

Preferred C: (1,000,000 shares authorized):

Preferred D; (1,000,000 shares authorized):

Preferred E; (2,000,000 shares authorized):

6. Discontinued Operations

There was no depreciation expense for the period

7. Potential Merger

On March 29, 2023 FlooidCX Corp. (“FLCX”), a Nevada corporation entered into An Agreement and Plan of Merger (the “Agreement”) with Quantum Energy, Inc., a Nevada corporation (“QREE”). Under the terms of the Agreement, the shares of QREE will be exchanged for the shares of FLCX on the following basis:

Under the terms of the Agreement, the surviving company will change its name from flooidCX Corp. to Quantum Energy, Inc. and management shall apply to change the trading symbol of the surviving corporation from FLCX to QREE.

The Agreement contains representations and warranties of the parties that are common to such agreements. The merger transaction is subject to regulatory approval and applications for such approval would be submitted to all applicable regulatory agencies, including the Securities and Exchange Commission and the Financial Industry Regulatory Authority. In addition, management plans to file a registration statement on SEC Form S-4 to register the shares to be issued to the Quantum shareholders. Under the Agreement, the transaction may not proceed in the event that holders with more than 20% of the number of outstanding shares of QREE shall dissent from the transaction. Certain members of the management of FLCX are also members of the management of QREE. The Merger is nearing the filing of SEC Form S-4, SEC and FINRA comments, and Nevada state corporate filings to complete.

Inductance Energy Corporation, (“IE”), of Wyoming, shall be operated as a subsidiary of the surviving entity, currently IE is operated as a subsidiary of Quantum Energy, Inc. Shareholders of Inductance Energy Corporation will retain their current shareholding in IE.

8. Subsequent Events

On May 19, 2023 the Company issued 3,000 Preferred D shares to Michael Halverson TTEE of The Five Star Trust for marketing to potential distributorships.

On May 22, 2023 amended its articles to:

On May 24, 2023 at the agreement of MP Special Purposes Corporation, the Company cancelled 1,000,000 of its Preferred Series A shares held by MP Special Purposes Corporation.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides an analysis of the Company’s financial condition and results of operations and should be read in conjunction with the Interim Consolidated Financial Statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the Company’s Annual Report on Form 10-K filed for the fiscal year ended February 28, 2021. The discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors.

Overview

flooidCX Corp., formerly known as Gripevine, Inc. (the “Company”), was incorporated under the name Baixo Relocation Services, Inc. in the state of Nevada on January 7, 2014.

Effective February 28, 2017, we entered into a share exchange agreement (the “MBE Exchange Agreement”) with MBE Holdings Inc., a private corporation organized under the laws of Delaware (“MBE”) and the shareholders of MBE (the “MBE Shareholders”), pursuant to which MBE Exchange Agreement we acquired all the technology and assets and assumed all liabilities of MBE, and MBE became our wholly-owned subsidiary. In accordance with the terms and provisions of the MBE Exchange Agreement, an aggregate of 5,248,626 (pre-reverse split) shares of our restricted common stock were issued to the MBE Shareholders in exchange for 157,458,778 of the total issued and outstanding shares of MBE.

Effective March 18, 2019, we changed our name to flooidCX Corp. pursuant to Certificate of Amendment to our Articles of Incorporation filed with the Nevada Secretary of State. The name of the Company was changed as part of our rebranding, which better reflects our new business direction into the customer care and feedback solutions space – offering easy to adapt customer care and feedback solutions to enterprises of all sizes.

On May 17, 2019, we entered into a Share Exchange Agreement (the “R1 Exchange Agreement”) with the stockholders of Resolution 1, Inc., a Delaware corporation (“R1”), to acquire all of the outstanding shares of R1 in exchange for 10,000,000 (pre-reverse split) restricted shares of our common stock (the “Acquisition”). R1 has developed a comprehensive customer care and feedback management platform, which is delivered as a cloud-based, software as a service solution. R1 was founded in August 2012 by Richard Hue, the CEO and a director of our Company. The Acquisition was approved by the independent members of the board of directors of the Company. Since the majority shareholders of the Company and R1 are the same, this did not result in the change in control at the ultimate parent or the controlling shareholder level, and was accounted for as a common control transaction.

On January 27, 2021, the Company’s common stock began trading on a 1-for-85 reverse stock split basis.

Our mission is to help businesses bring back the conversation with customers with innovative, simple to use solutions that empower both the businesses and customers to communicate and create positive outcomes. With the consummation of the R1 Exchange Agreement resulting in R1 being our subsidiary, we now offer a suite of customer relationship management (CRM) solutions that enhances and builds upon our initial offering, “GripeVine.”

We offer unified communications and collaboration online CRM solutions - GripeVine and Resolution1. GripeVine is a consumer-to-business platform that helps build a customer feedback-minded community, focused on transparency, mutual respect and open communications among like-minded customers and businesses – all working together – to facilitate positive outcomes. It allows for private messaging between customers and businesses for positive resolutions, so that businesses are not forced to communicate via the comments section. Resolution1 functions as a cloud-based customer care and feedback workflow management platform, where businesses can manage the entire logistics of customer care, feedback or inquiries throughout their entire organizations. Businesses can respond quickly and accurately to customers, while keeping track of every customer interaction. The platform is designed to grow and scale, so that businesses of all sizes, from small to medium-size enterprises (SMEs) to large enterprises, can use this cloud-based customer care and feedback management system

Results of Operations

The following discussions are based on our unaudited interim consolidated financial statements, including our wholly-owned subsidiaries. These discussions summarize our unaudited interim consolidated financial statements for the three-month periods ended March 31, 2023 and 2022, and should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2022 and notes thereto included in the Form 10-KT filed with the SEC on May 04, 2023.

The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Quarterly Report on Form 10-Q. The financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Three-Month Period Ended March 31, 2023 Compared to Three-Month Period Ended March 31, 2022

Revenue.

There was no revenue generated for the three months ended March 31, 2023, as compared to $0 for the comparable period in 2022.

Operating expenses.

During the quarter ended March 31, 2023, we incurred operating expenses in the amount of $78,750 compared to operating expenses incurred during quarter ended comparable 2022 of $40,350 (an increase of $38,400). Operating expenses include: (i) recovery of general and administrative of $78,750 based on reconciliation of amounts due (2022: $28,984); and (ii) research and development of $0 (2022: $11,366). General and administrative expenses increased by $49,766, due primarily to the increase in cost of accounting and reports compilation. Research and development expenses decreased by $11,366 primarily due to a business focus adjusted to the preparation for merger.

Net loss.

The Company had net loss of $88,065 or $0.04 per share (continuing operations) for the three months ended March 31, 2023 compared to a net loss of $180,688 or $0.09 per share (continuing operations) for the three months ended March 31, 2022.

Discontinued operations

On June 27, 2022, the Company finalized the split off of MBE Holdings, Inc. As of June 27, 2022, the Company transferred all the equity in MBE Holdings, Inc. to Richard Hue, former majority shareholder and CEO of the Company. MBE’s historical operations consisted primarily of business holdings.

Liquidity and Capital Resources

As of March 31, 2023

Cash Flows from Operating Activities

We have generated negative cash flows from operating activities. For the Three Months ended March 31, 2023, net cash flows used in operating activities was $0 compared to $314,660 for the Nine Months ended March 31, 2023.

Cash Flows from Financing Activities

Net cash flows provided by financing activities during the Three Months ended March 31, 2022 was $92,242, which consisted of proceeds from loans from a third party. During the Three Months ended March 31, 2023, cash flows provided by financing activities was $0, which consisted of proceeds from loans from third party and related party. 

Off-Balance Sheet Arrangements

There were no off-balance sheet arrangements during the three months ended March 31, 2023 that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

Plan of Operation

At March 31, 2023 we had a working capital deficit of $3,986,554 and we will require additional financing in order to enable us to proceed with our plan of operations.

Thus far, we believe that COVID-19 has not impacted our business negatively. As more businesses adopt virtual office operation models due to the risk of the virus, such adoption may in fact present us with more opportunities to offer businesses cost-effective, cloud-based solutions.

When we will require additional financing, there can be no assurance that additional financing will be available to us, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due. We are pursuing various alternatives to meet our immediate and long-term financial requirements.

We anticipate continuing to rely on equity sales of our common stock in order 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 equity securities or arrange for debt or other financing to fund our planned business activities.

There is substantial doubt that we can continue a going business for the next twelve months unless we generate sufficient revenues. There is no assurance we will ever reach that point. In the meantime, the continuation of the Company is dependent upon the continued financial support from our shareholders, our ability to obtain necessary equity financing to continue operations and the attainment of profitable operations.

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition and results of operations.

We require approximately $1,500,000 for the next 12 months as a reporting issuer and additional funds are required. The additional funding may come from equity financing from the sale of our common stock or loans from management, related parties or third parties. In the event we do not raise sufficient capital to implement its planned operations or divest, your entire investment could be lost.

Recent Accounting Pronouncements

As reflected in Note 2 of the Notes to the Interim Consolidated Financial Statements, there have been recent accounting pronouncements or changes in accounting pronouncements that impacted the Nine Months ended March 31, 2023 or which are expected to impact future periods as follows:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2022.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer/Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2023. Based on such evaluation, we have concluded that, as of such date, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer/Principal Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining internal control over financial reporting for our internal control system which was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over our financial reporting includes those policies and procedures that:

All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error or circumvention through collusion of improper overriding of controls. Therefore, even those internal control systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Under the supervision and with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer), management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of March 31, 2023, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)( 2013). Based on our evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the evaluation date due to the factors stated below:

Management assessed the effectiveness of our company’s internal control over financial reporting as of the evaluation date and identified the following material weaknesses:

We do not have a functioning audit committee or sufficient outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) may consider appointing outside directors and audit committee members in the future.

Management, including our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer), has discussed the material weakness noted above with our independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.

This transition report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this transition report.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the year ended March 31, 2023 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company currently is not a party to any legal proceedings and, to the Company’s knowledge; no such proceedings are threatened or contemplated.

ITEM 1A. RISK FACTORS

Not applicable.

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

On May 19, 2023 there were sales of 3,000 Preferred D shares to Michael Halverson TTEE of The Five Star Trust of unregistered securities by the Company during the quarter ended March 31, 2023.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed as part of this Form 10-Q:

____________ 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.