Graphene & Solar Technologies Ltd - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2021

☐ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number: 333-174194

23 Corporate Plaza Drive, Suite 150

Newport Beach, CA 92660

(Address of principal executive offices, including Zip Code)

(949) 478-8387

(Issuer’s telephone number, including area code)

(formerly known as Solar Quartz Technologies Corporation)

(Former name or former address if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 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 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 ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 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 September 02, 2021, the registrant had 290,237,369 outstanding shares of common stock.

GRAPHENE & SOLAR TECHNOLOGIES LIMITED

FORM 10-Q

TABLE OF CONTENTS

GRAPHENE & SOLAR TECHNOLOGIES LIMITED 

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

GRAPHENE & SOLAR TECHNOLOGIES Limited 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

GRAPHENE & SOLAR TECHNOLOGIES LIMITED

(Formerly Solar Quartz Technologies Corporation)

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

(Unaudited)

Three and Nine Months Ended June 30, 2021 and 2020

The accompanying notes are an integral part of these consolidated financial statements.

GRAPHENE & SOLAR TECHNOLOGIES Limited 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Nine-Month Period Ended June 30, 2021 and 2020

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

GRAPHENE & SOLAR TECHNOLOGIES Limited 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION

These consolidated financial statements of Graphene & Solar Technologies Limited (GSTX or the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). In the opinion of management, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to Securities and Exchange Commission (SEC) rules and regulations. These financial statements should be read along with Solar Quartz’s audited financial statements as of September 30, 2020.

Going Concern – The Company has incurred cumulative net losses throughout 2019 and 2020 financial periods and currently in 2021 periods. Accordingly, it requires capital to fund working capital deficits and for future operating activities to take place. The Company’s ability to raise new funds through the future issuances of debt or common stock is unknown. The obtainment of additional financing, the successful development of a plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern.

Going Concern – The Company has incurred cumulative net losses since inception of $16,225,973 at June 30, 2021. Accordingly, it requires capital to fund working capital deficits and for future operating activities to take place. The Company’s ability to raise new funds through the future issuances of debt or common stock is unknown. The obtainment of additional financing, the successful development of a plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability of the Company to continue its operations is dependent on management’s plans, which include the raising of capital through debt and/or equity markets, with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. There can be no assurance that the Company will be able to raise any additional capital and therefore raise doubt about the Company’s ability to continue as a going concern.

Future issuances of the Company’s equity or debt securities will be required for the Company to finance operations and continue as a going concern. The financial statements do not include any adjustments that may result from the outcome of these uncertainties.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Principles of Consolidation and Basis of Presentation — The consolidated financial statements include the accounts of Graphene & Solar Technologies Limited and its subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). A summary of the significant accounting policies applied in the preparation of the accompanying financial statements can be found in the Company’s Annual Report in form 10-K for the year ended September 30, 2020.

Use of Estimates - The preparation of financial statements in conformity with GAAP 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. Actual results could differ from those estimates.

Significant estimates include but are not limited to the estimated useful lives of equipment for purposes of depreciation and the valuation of common shares issued for services, equipment and the liquidation of liabilities.

Cash and Cash Equivalents -Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of June 30, 2021 and 2020, the Company had $1,170 and $747 in cash, respectively, and no cash equivalents.

Concentrations - As of June 30, 2021, there were no known concentrations other than those identified in Note 3 and Note 4 below.

Derivative Financial Instruments – The Company accounts for freestanding contracts that are settled in a company’s own stock, including common stock warrants, to be designated as an equity instrument or generally as a liability. A contract so designated is carried at fair value on a company’s balance sheet, with any changes in fair value recorded as a gain or loss in a company’s results of operations.

The Company records all derivatives on the balance sheet at fair value, adjusted at the end of each reporting period to reflect any material changes in fair value, with any such changes classified as changes in derivatives valuation in the statement of operations. The calculation of the fair value of derivatives utilizes highly subjective and theoretical assumptions that can materially affect fair values from period to period. The recognition of these derivative amounts does not have any impact on cash flows.

At the date of the conversion of any convertible debt, the pro rata fair value of the related embedded derivative liability is transferred to additional paid-in capital.

There was no derivative activity in fiscal quarter ending June 30, 2020. Therefore, no derivative liabilities were recorded during the quarter ended June 30, 2021.

Stock-Based Compensation -ASC 718, “Compensation - Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees and non-employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values on the grant date. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

During the quarter ended June 30, 2021, the Company issued 1,100,000 shares of the Company’s common stock to consultants. Since September 30, 2020 the Company has issued a total of 7,888,596 shares of the Company’s common stock to consultants. The fair value of the shares, as determined by reference market price of the Company’s common stock on each grant date, during the quarter ended June 30, 2021 aggregated $481,000.

During the quarter ended June 30, 2021, the Company issued no shares of the Company’s common stock to members of the Board of Directors or employees.

Total stock-based compensation expense was $481,000 and $300,000 for the quarters ended June 30, 2021 and 2020, respectively.

Foreign Currency Translations – The functional currency of the Company’s foreign subsidiary is primarily the respective local currency. Assets and liabilities of the Company’s foreign subsidiary are translated into U.S. Dollars at the year-end exchange rate, and revenues and expenses are translated at average monthly exchange rates. Translation gains and losses are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity. All other foreign currency transaction gains and losses are included in other (income) expense, net.

Earnings Per Share - Basic earnings per share have been calculated based upon the weighted-average number of common shares outstanding. Diluted earnings per share were not calculated as such potential shares would be anti-dilutive.

Reclassifications - Certain amounts previously presented for prior periods have been reclassified to conform to the current presentation. The reclassifications had no effect on net loss, working capital or equity previously reported.

NOTE 3 – CONVERTIBLE NOTES PAYABLE

The Company’s indebtedness as of June 30,2021 and September 30, 2020 were as follows:

Schedule of notes payable

Notes Payable and Other Loans

During 2015 and 2016, the Company executed promissory notes payable with six individuals with an aggregate principal balance of $60,000. The notes were due on demand and included interest at 10%. As of June 30, 2021 and September 30, 2020, the total promissory notes payable balance was $95,197 and $90,710 including accrued interest of $35,197 and $30,710, respectively. On January 15, 2019, the holder of a note with a principal balance of $10,000 made demand for payment. To date, the note has not been paid.

During the year ended September 30, 2020 a Company Advisor, loaned the Company $5,781. The loan is a demand note at zero interest.

On May 18, 2021 a Company Advisor, loaned the Company $18,795. The loan is on demand at zero interest for a period of up to two years.

Convertible Notes Payable

As of June 30, 2021 and September 30, 2020, noteholders representing $70,747 in outstanding principal had not requested the exchange of shares of common stock. As of June 30, 2021 and September 30, 2020, the exchange obligation payable was $155,611 and $147,673 including accrued interest of $84,863 and $76,926, respectively. As of June 30, 2020 and September 30, 2020, the exchange obligation was for 47,012 shares and 44,614 shares of common stock, respectively.

On February 1, 2016, the Company issued convertible secured note payable of $30,000 to an individual. The note was due on January 31, 2017 and included interest at 10%. The note was convertible at discretion of the holder into common shares of the Company at the rate of $0.50 per shares. The Company has not extended the maturity date and the note is in default. As of June 30, 2021 and September 30, 2020, the total convertible note payable balance was $46,241 and $43,997, including accrued interest of $16,241 and $13,997 respectively. As of June 30, 2021 and 2020, the exchange obligation was for 92,482 shares and 86,482 shares of common stock, respectively.

On December 5, 2019, the Company issued a convertible note payable in the amount of $68,220. The convertible note bear interest at 10% and matures on December 5, 2021 the principal and accrued interest of this convertible note can be converted at the discretion of the holder into common shares at 45% discount to the ADR 20 days prior to notification of conversion. The majority shareholder agreed to increase authorized shares if needed in order to settle this debt. This note was discounted for the full amount and the amount of amortization during the period was $10,718.

On October 2, 2020, the Company closed a Securities Purchase Agreement with Geneva Roth Remark Holdings Inc (“GRRH”). In connection therewith, the Company issued GRRH a convertible note payable in the amount of $68,000. The note, including interest at 10%, matures on September 24, 2021. After 180 days, being from March 23, 2021, the note is convertible at a conversion price which is at 39% discount to the lowest trading price during the previous twenty trading days prior to the date of a conversion notice. The note contained an original issue discount of $3,000.

This convertible note and accrued interest of $3,400 was fully converted during the period for a total of 232,823 Common shares of the Company. The balance of discount of $41,543 was fully expensed during the period.

On November 11, 2020, the Company closed a Securities Purchase Agreement with Geneva Roth Remark Holdings Inc (“GRRH”). In connection therewith, the Company issued GRRH a convertible note payable in the amount of $53,000. The note, including interest at 10%, matures on November 11, 2020. After 180 days, the note is convertible at a conversion price which is at 39% discount to the lowest trading price during the previous twenty trading days prior to the date of a conversion notice. The note contained an original issue discount of $3,000.

The majority shareholder agreed to increase authorized shares if needed in order to settle this convertible loan note debt. The note was discounted for the full amount and fully amortized during the period. The full discount of $33,885 was fully expensed during the period.

This convertible note and accrued interest of $2,650 was fully converted during the period for a total of 301,623 Common shares of the Company.

NOTE 4- RELATED PARTY

PGRNZ Limited, a management company controlled by the Company’s Chief Executive Officer, and a Company Director, provides management services to the Company for which the Company is charged $75,000(AUD) quarterly, approximately $56,385 (US).

As of June 30, 2021 and September 30, 2020, accrued expenses due to PGRNZ and other related parties was $863,708 and $717,075 respectively.

NOTE 5 – STOCKHOLDERS’ EQUITY

Other than for Stock based compensation (see Note 2) and conversions of Notes Payables, 1,900,000 new Common shares were issued during the nine month period ending June 30, 2021 for proceeds totaling $107,617.

The Company has a total of 6,778,366 shares that remain approved, reserved and outstanding and not yet issued by the Transfer Agent at June 30, 2021

NOTE 6 – COMMITTMENTS & CONTINGENCIES

Contingencies

From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events. As of June 30, 2021, there were no pending or threatened litigation against the Company.

NOTE 7 – NEW SUBSIDIARY COMPANY

US Thin-Film Corporation was registered in April 2021 in the State of Nevada USA as a wholly owned subsidiary of Graphene & Solar Technologies Limited. The purpose of this subsidiary is to hold all of the share capital in Cima Specialty Materials Ltd (“CSML”).

NOTE 8 – SUBSEQUENT EVENTS

During the month of July 2021 additional Common shares of 1,000,000 were approved for Stock based compensation to two company advisors at $0.20 per share, 500,000 Common shares for stock based compensation approved as second tranche with existing Company Advisor agreement from May 2021 at $0.50 per share as well as 500,000 Common shares for stock based compensation for a Company Advisor approved at $0.35 share.

Cima Specialty Materials Ltd “CSML” has been acquired by US Thin-Film Corporation under a Share Sale and Purchase Agreement with parent company CIMA Nanotech Holdings Limited. Under the terms of the Agreement 31,665,604 Regulation 144, restricted Common shares of the Company were agreed, approved and issued as full and total consideration for the share sale and purchase of CSML. (Refer also ITEM II MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION.)

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

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form 10-Q.

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

FORWARD LOOKING STATEMENTS

The information contained in this Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties, including among other things, statements regarding our capital needs, business strategy and expectations. Any statement which does not contain a historical fact may be deemed to be a forward-looking statement. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. In evaluating forward looking statements, you should consider various factors outlined in our Form 10-K report for the year ended September 30, 2020, filed with the U.S. Securities Exchange Commission (“SEC”) and, from time to time, in other reports we file with the SEC. These factors may cause our actual results to differ materially from any forward-looking statement. We disclaim any obligation to publicly update these statements or disclose any difference between our actual results and those reflected in these statements.

Overview

In July 2017 we acquired Solar Quartz Technologies Limited, a New Zealand corporation. We continue to seek new financing in the form of equity, debt or a combination thereof to meet development and general operating obligations. Absent achieving sufficient funds soon, our viability is in doubt. The Company has managed to raise some capital by sale of shares, but as of June 30, 2021, the Company has not been successful in raising sufficient funds; However, work is underway to secure funding, and we believe that funding for the Company is possible in the near future although no assurance can be made as to the amount of funds, if any, or the terms thereof.

The Company has appointed additional advisors to assist in securing new financing for its projects and general operating obligations.

Current Business and Operations

We continue to develop our detailed plans for multi-faceted production facilities in Queensland Australia to enable us to process raw high purity quartz from the region into higher value high purity quartz products and sands (HPQS). Further work is proceeding in respect to graphene production capability and business planning on thin film capability.

Currently GSTX is primarily focused upon completing development and initial production for commercially viable and efficient photovoltaic “Transparent Solar Cells/Panels”. This is to particularly meet increasing demand from the construction industry for clear and transparent solar panel windows in high-rise buildings. Such installations can significantly contribute to the facility’s electricity requirements.

In 2017 GSTX recognized the remarkable potential of the amazing new 2D (Length & Width only -One micron thickness) wonder-material Graphene to be utilized in high- end electronics production and for the production more robust and efficient essential combination materials. GSTX the US Public company, (then Solar Quartz Technologies) (SQTX) was renamed Graphene & Solar Technologies (GSTX) in July 2018. Since 2017 GSTX has established a strong working association with a pioneering United States based producer of Graphene. This US production house is highly regarded internationally for their ESG” compliant processing and production techniques utilized for Graphene manufacturing. The production house has also established itself as a major exponent of Graphene enhanced polymers currently used in low-cost rapid production large scale 3D Home printing of near indestructible housing. Following three (3) years of extensive evaluation and design consideration GSTX and its USA associate, have agreed to progress a new Joint Venture to establish an Australian Graphene production facility in Brisbane, Australia forthwith. The terms of the joint venture and funding are yet to be finalized.

For 18 months the Company has been conducting due diligence on a company holding a valuable patent portfolio in the area of transparent and conductive thin film and that would enable the Company to complement its expertise in High Purity quartz and downstream applications in next generation transparent and flexible PV Solar Cell and semiconductor applications. In July, the Company closed a Share Sale and Purchase Agreement through its wholly owned subsidiary, US Thin-Film Corporation (a Nevada company registered in April 2021 for this purpose) with CIMA Nanotech Holdings Limited, “CNHL”, (a Cayman Island Registered company) to acquire its wholly owned subsidiary company Cima Specialty Materials Ltd and its wholly owned subsidiary companies, one of which holds a valuable portfolio of patents.

Under the terms of the Agreement 31,665,604 Regulation 144, restricted Common shares of the Company were agreed, approved and issued as full and total consideration for the share sale and purchase.

US Thin Film Corporation (USTFC), a United States company established in April 2021 as a 100% owned subsidiary the Company, now owns via the acquisition of Cima Specialty Materials Ltd exclusive, Intellectual Property rights to a Patent Portfolio of 72 (seventy-two) Patents. The Patents broadly cover the production of Transparent Conductive Thin Films (TCF)and several advanced nano-particle technologies used to produce innovative next-generation Thin-Film Conductive Coatings, Electro-Magnetic Shielding, transparent antennas, advanced touch screens, transparent anti-ice heating/defogging applications and of importance for next generation transparent solar panels.

Results of Operations

For the fiscal quarters ended June 30, 2021 and 2020 we generated no revenues, and thus no cost of sales or gross profits.

For the fiscal quarters ended June 30, 2021 and 2020, we incurred $660,644 and $464,110 respectively in operating expenses.

For the fiscal quarter ended June 30, 2021 we recorded other expenses of $99,267 while in June 30, 2020 we incurred expenses of $13,349 both items are represented by accrued interest on debt. Other income of $6,656 was earned in the fiscal quarter, June 30, 2021.

For quarter ended June 30, 2021, we reported net loss before taxes of $753,255 while in the six months ended June 30, 2020, we reported a net loss before taxes of $475,487. Since there were no tax obligations in either year, net income / loss in each year was the same as that reported before taxes.

For the periods ended September 30, 2020 and June 30, 2021, our cash positions were $12 and $1170 respectively.

As of June 30, 2021, we had total current liabilities of $2,080,586 while as of September 30, 2020, we had total current liabilities of $1,684,546 an increase of about23%. Accrued interest payable increased from $132,099 to $147,763 all attributable to accruals on the loans and the convertible notes payable.

Liquidity and Capital Resources

As of June 30, 2021, we had $16,749 in total current assets, $1,041 in total other assets and $2,080,586 in total current liabilities. Accordingly, we had a working capital deficit of $2,079,926.

Operating activities used $218,410 in cash for the nine-month period ended June 30, 2021, as compared to $213,764 for the nine-month period ended June 30, 2020.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

For a discussion of our accounting policies and related items, please see the Notes to the Financial Statements, included in Item 1.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive and Interim Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and is communicated to our management, including our Principal Executive [and Financial Officer], or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our management concluded that, as of December 31, 2020, our disclosure controls and procedures were not effective.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020, based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 (“COSO”).

As of period covered by this Quarterly Report on Form 10-Q, we have concluded that our internal control over financial reporting was ineffective. The Company’s assessment identified certain material weaknesses which are set forth below:

Functional Controls and Segregation of Duties

Because of the Company’s limited resources, there are limited controls over information processing.

There is an inadequate segregation of duties consistent with control objectives. Our Company’s management is composed of a small number of individuals resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation, we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will reassess this matter in the following year to determine whether improvement in segregation of duty is feasible.

Accordingly, as the result of identifying the above material weakness we have concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal controls.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of our Principal Executive and Financial Officer and implemented by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements in accordance with U.S. generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Roger May, our Principal Executive Officer, evaluated the effectiveness of our internal control over financial reporting as of June 30, 2021 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO Framework (2013). Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management has addressed the underlying causes for our weaknesses in internal control since early FY 2021. Our efforts to raise both debt and equity capital soon will allow us to undertake additional engagement of external independent consultants to assist with the processing of data and drafting financial reports on a timely basis in future reporting periods.

PART II

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Our business is subject to numerous risks and uncertainties including but not limited to those discussed in “Risk Factors” in our annual report on Form 10-K.

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

Please see Note 5 to our Financial Statements.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits

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.

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