Rapid Therapeutic Science Laboratories, Inc. - Annual Report: 2019 (Form 10-K)

References in this Annual Report on Form 10-K to the “Company”, “we”, “our” and “us” are used herein to refer to Holly Brothers Pictures, Inc.

Overview

Under our business plan launched in February 2018 we set out to build a cryptocurrency mining operation, operating specialized computers (also known as “crypto-currency miners") that generate cryptocurrency (primarily Bitcoin).  A bitcoin is an asset that can be transferred among parties via the Internet, but without the use of a central administrator or clearing agency. The term decentralized is often used in descriptions of bitcoin, in reference to bitcoin’s lack of necessity for administration by a central party.

Through our subsidiary, Power Blockchain LLC (“Power Blockchain”), we began operating a start-up venture in February 2018 that specializes in blockchain mining for the Bitcoin network, the computer intensive process required to verify and record the digital exchange of money for crypto-currency transactions. In exchange for processing these complex mathematical equations, we would be rewarded with digital currency. We have yet to commence meaningful operations and are currently performing a preliminary evaluation of our business plans going forward.

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Our Operations

On February 14, 2018, we were granted permission from the Kingdom of Lesotho to conduct crypto-currency mining operations in Lesotho. As part of this permission, we were permitted to operate by the Lesotho Electricity Company and we negotiated an electric rate agreement. As of the date of this report, we owned 70 crypto-currency miners and Power Control Units (PCU), 50 of which have been installed in Lesotho, 10 of which are in customs in South Africa, and 10 of which are in storage in South Africa. We commenced mining operations in Lesotho but have not generated any revenues to date.  

Due to subsequent economic and market conditions, we decided to place the Company’s cryptocurrency mining operations in the Kingdom of Lesotho on hold beginning around the middle of 2018.  With the recent increase in the quoted market price of bitcoin, however, we are presently in the process of performing a preliminary evaluation of the feasibility of resuming our bitcoin mining operations in some capacity.  We still maintain ownership and control of the miners and other equipment used in the cryptocurrency mining operations in that country (notwithstanding the fact that the cost associated with these assets has been fully reserved on the Company’s Balance Sheet since March 31, 2018).

Corporate History

We were incorporated on February 22, 2013 as PowerMedChairs, a Nevada corporation. Since the time of our incorporation until February 2018, our plan of operation was to re-build primarily electric/power wheelchairs in disrepair. On June 2, 2017, we changed our name to Holly Brothers Pictures, Inc. In February 2018, we ceased this business and commenced our blockchain mining business through our acquisition of Power Blockchain described below.

On February 1, 2018, we entered into an exchange agreement pursuant to which we acquired 100% of the equity interests in Power Blockchain from the owners of Power Blockchain in exchange for the issuance for convertible notes in aggregate principal amount of $2.2 million. The notes: (i) mature five years from the date of issuance: (ii) accrue interest at 5% per annum; (iii) require repayment in four equal installments on the second, third, fourth and fifth anniversary dates after issuance; and (iv) are convertible at the option of the holder into our common stock at a conversion price of $0.13 per share. Upon consummation of the exchange agreement, Power Blockchain became our wholly owned subsidiary.  Power Blockchain had outstanding debt obligations in aggregate principal amounts of $570,000, accruing interest at rates between 12-13% per annum, which obligations were overdue and in default. In March 2018, the Power Blockchain debt holders commenced a lawsuit against us in San Diego Superior Court, in connection with outstanding and overdue debt obligations. On March 22, 2018, we agreed to enter into a conditional settlement with the debt holders. The settlement agreement calls for the periodic issuance to the debt holders, subject to certain ownership and temporal limitations, of an aggregate of up to 3,078,000 and 3,157,000 shares respectively, exempted from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, and the California Corporations Code Section 25017(f)(3), as amended, after a fairness hearing evaluating the relative merits of the proposed agreement, which was held and approved on April 2, 2018.

Employees

As of March 31, 2019, we had no permanent employees and two part-time contractors/consultants.

Legal Proceedings

We are not subject to any litigation.

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The following risks and uncertainties should be carefully considered. If any of the following occurs, our business, financial condition or operating results could be materially harmed. An investment in our securities is speculative in nature, involves a high degree of risk and should not be made by an investor who cannot bear the economic risk of its investment for an indefinite period of time and who cannot afford the loss of its entire investment.

Risks Relating to Our Business

We have a history of operating losses, and we may not be able to achieve or sustain profitability; we have recently shifted to an entirely new business and may not be successful in this new business.

We are not profitable and have incurred losses since our inception. We expect to continue to incur losses for the foreseeable future, and these losses could increase as we continue to work to develop our business.  We were previously engaged in pursuing the business of re-building wheelchairs in disrepair and the sales of wheelchairs and were not successful in that business. In February 2018, we determined to instead pursue a blockchain and digital currency‑related business. We have yet to commence meaningful operations in that business and are currently holding those business plans in suspense. Even if we achieve profitability in the future by adopting a different business strategy, we may not be able to sustain profitability in subsequent periods.

We may be unable to raise additional capital needed to grow our business.

We will likely continue to operate at a loss, at least until our business becomes established, and we expect to need to raise additional capital to expand our operations and pursue our growth strategies, including potential acquisitions of complementary businesses, and to respond to competitive pressures or unanticipated working capital requirements.  We may not be able to obtain additional debt or equity financing on favorable terms, if at all, which could impair our growth and adversely affect our existing operations. If we raise additional equity financing, our shareholders may experience significant dilution of their ownership interests, and the per share value of our common stock could decline. Furthermore, if we engage in additional debt financing, the holders of debt would have priority over the holders of common stock, and we may be required to accept terms that restrict our ability to incur additional indebtedness and take other actions that would otherwise be in the interests of our shareholders, forcing us to maintain specified liquidity or other ratios. We may not be able to compete with other companies, some of whom have greater resources and experience.

We may not be able to compete successfully against present or future competitors.

We do not have the resources to compete with larger providers of similar services at this time. With the limited resources we have available, we may experience great difficulties in expanding our operations. Competition from existing and future competitors could result in our inability to secure expand our business. This competition from other entities with greater resources and experience may result in our failure to maintain or expand our business, as we may never be able to successfully execute our business plan.

Our change in our business strategy and name could subject us to increased SEC scrutiny.

We previously were engaged in the business of re-building wheelchairs in disrepair and the sales of wheelchairs. In February 2018, we determined to instead pursue a crypto-currency mining business, through our acquisition of Power Blockchain, LLC. The SEC has announced that it is scrutinizing public companies that change their name or business model in a bid to capitalize upon the hype surrounding blockchain technology, and has suspended trading of certain of such companies.  SEC Chairman Jay Clayton warned that it is not acceptable for companies without a meaningful track record in the sector to participate in blockchain technology, change their name and immediately offer investors securities without providing adequate disclosures about the risks involved.  As a result, we could be subject to substantial SEC scrutiny that could require devotion of significant management and other resources and potentially have an adverse impact on the trading of our stock.

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Risks Relating to Our Common Stock

Your ownership may be diluted if additional capital stock is issued to raise capital, to finance acquisitions or in connection with strategic transactions.

We will need to raise additional funds to expand our operations or finance acquisitions by issuing equity or convertible debt securities, which would reduce the percentage ownership of our existing stockholders. Our board of directors has the authority, without action or vote of the stockholders, to issue all or any part of our authorized but unissued shares of common. Our articles of incorporation authorizes us to issue up to 200,000,000 shares of common stock. Future issuances of common stock would reduce your influence over matters on which stockholders vote and would be dilutive to earnings per share.

Shares issuable upon the conversion of convertible notes may substantially increase the number of shares available for sale in the public market and depress the price of our common stock.

In connection with our acquisition of Power Blockchain, we issued convertible notes in aggregate principal amount of $2.2 million. The notes: (i) mature five years from the date of issuance: (ii) accrue interest at 5% per annum; (iii) require repayment in four equal installments on the second, third, fourth and fifth anniversary dates after issuance; and (iv) are convertible at the option of the holder into our common stock at a conversion price of $0.13 per share.

Power Blockchain had outstanding debt obligations in aggregate principal amounts of $570,000, accruing interest at rates between 12-13% per annum, which obligations were overdue and in default. In March 2018, the Power Blockchain debt holders commenced a lawsuit against us in San Diego Superior Court, in connection with outstanding and overdue debt obligations. On March 22, 2018, we agreed to enter into a conditional settlement with the debt holders. The settlement agreement calls for the periodic issuance to the debt holders, subject to certain ownership and temporal limitations, of an aggregate of up to 3,078,000 and 3,157,000 shares respectively, exempted from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, and the California Corporations Code Section 25017(f)(3), as amended, after a fairness hearing evaluating the relative merits of the proposed agreement, which was held and approved on April 2, 2018.

To the extent any of these foregoing notes are converted into common stock and as and when the shares issuable pursuant to the foregoing lawsuit settlement are issued, there will be dilution to stockholders.

The concentration of our common stock ownership by our current management will limit your ability to influence corporate matters.

Our directors and executive officers beneficially own and are able to vote in the aggregate 83.1% of our outstanding common stock. As such, our directors and executive officers, as stockholders, will continue to have the ability to exert significant influence over all corporate activities, including the election or removal of directors and the outcome of tender offers, mergers, proxy contests or other purchases of common stock that could give our stockholders the opportunity to realize a premium over the then-prevailing market price for their shares of common stock. This concentrated control will limit your ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. In addition, such concentrated control could discourage others from initiating changes of control. In such cases, the perception of our prospects in the market may be adversely affected and the market price of our common stock may decline.

We have no intention of declaring dividends in the foreseeable future.

The decision to pay cash dividends on our common stock rests with our board of directors and will depend on our earnings, unencumbered cash, capital requirements and financial condition. We do not anticipate declaring any dividends in the foreseeable future, as we intend to use any excess cash to fund our operations. Investors in our common stock should not expect to receive dividend income on their investment, and investors will be dependent on the appreciation of our common stock to earn a return on their investment.

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Failure to maintain effective internal control over our financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could cause our financial reports to be inaccurate.

We are required pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, to maintain internal control over financial reporting and to assess and report on the effectiveness of those controls. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our management concluded that our internal controls over financial reporting were, and continue to be ineffective, and as of the year ended March 31, 2019. While management is working to remediate the material weakness, there is no assurance that such changes, when economically feasible and sustainable, will remediate the identified material weaknesses or that the controls will prevent or detect future material weaknesses. If we are not able to maintain effective internal control over financial reporting, our financial statements, including related disclosures, may be inaccurate, which could have a material adverse effect on our business.

None.

Our corporate and executive offices have been located in an office space in San Diego, California, provided by an attorney for the Company at no cost or commitment to the Company since February 2018.  Beginning in February 2019, the attorney is no longer providing any services to the Company, however, he is continuing to allow the Company to receive any incoming mail at his office.

We do not own any real property.

From time to time in the ordinary course of our business, we may be involved in legal proceedings, the outcomes of which may not be determinable. The results of litigation are inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time and result in diversion of significant resources. We are not able to estimate an aggregate amount or range of reasonably possible losses for those legal matters for which losses are not probable and estimable, primarily for the following reasons: (i) many of the relevant legal proceedings are in preliminary stages, and until such proceedings develop further, there is often uncertainty regarding the relevant facts and circumstances at issue and potential liability; and (ii) many of these proceedings involve matters of which the outcomes are inherently difficult to predict. We have insurance policies covering potential losses where such coverage is cost effective.

We are not at this time involved in any legal proceedings.

Not applicable.

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Market Information

Our common stock is quoted on the OTC bulletin board.  During fiscal years ended March 31, 2019 and 2018 our stock was quoted under the symbol “HLLY” until February 28, 2018 when our symbol was changed to “MINR”. The last trade of our common stock occurred on May 1, 2019 and was $0.35 per share.

There have been only very few trades of our common stock since it was cleared for quotation, and there are no assurances an active market will ever develop for the stock.

Holders

As of July 9, 2019, there were approximately 35 holders of record of our common stock. In addition, we believe that additional beneficial owners of our common stock hold their shares in nominee or in “street name” accounts through brokers.

Dividends

We have never paid any dividends on our common stock. The payment of dividends in the future will be contingent upon our revenues and earnings, if any, capital requirements and general financial condition. It is the present intention of our Board of Directors to retain all earnings, if any, for use in our business operations and, accordingly, our Board of Directors does not anticipate declaring any dividends in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth information regarding our equity compensation plans at March 31, 2019:

(1)Represents shares of common stock that may be issuable under our 2018 Stock Plan, which has been approved by our stockholders. As of March 31, 2019, no securities had been issued pursuant to the 2018 Stock Plan. 

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Recent Sales of Unregistered Securities

By way of background, we entered into an exchange agreement pursuant to which we acquired 100% of the equity interests in Power Blockchain from the owners of Power Blockchain in exchange for the issuance for convertible notes in aggregate principal amount of $2.2 million on February 1, 2018. The notes: (i) mature five years from the date of issuance: (ii) accrue interest at 5% per annum; (iii) require repayment in four equal installments on the second, third, fourth and fifth anniversary dates after issuance; and (iv) are convertible at the option of the holder into our common stock at a conversion price of $0.13 per share. Upon consummation of the exchange agreement, Power Blockchain became our wholly owned subsidiary.  The convertible notes were sold without registration under the Securities Act in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering to accredited investors, and in reliance on similar exemptions under applicable state laws.

Power Blockchain had outstanding debt obligations in aggregate principal amounts of $570,000, accruing interest at rates between 12-13% per annum, which obligations were overdue and in default. In March 2018, the Power Blockchain debt holders commenced a lawsuit against us in San Diego Superior Court, in connection with outstanding and overdue debt obligations. On March 22, 2018, we agreed to enter into a conditional settlement with the debt holders. The settlement agreement calls for the periodic issuance to the debt holders, subject to certain ownership and temporal limitations, of an aggregate of up to 3,078,000 and 3,157,000 shares respectively, exempted from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, and the California Corporations Code Section 25017(f)(3), as amended, after a fairness hearing evaluating the relative merits of the proposed agreement, which was held and approved on April 2, 2018.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On January 25, 2018, we completed a share purchase agreement with Anton Yeranossian, Irina Seppanen and A&A Medical Supply, LLC pursuant to which the Company agreed to purchase from such shareholders an aggregate of 2,661,172 shares of Company common stock for an aggregate purchase price of $340,000.

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

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in this Form 10-K. The forward-looking statements included in this discussion and elsewhere in this Form 10-K involve risks and uncertainties, including those set forth under “Cautionary Statement About Forward-Looking Statements.” Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in this Item and in Item 1A - “Risk Factors.”

Overview

We were incorporated on February 22, 2013 as PowerMedChairs, a Nevada corporation. Since the time of our incorporation until February 2018, our plan of operation was to re-build primarily electric/power wheelchairs in disrepair. On June 2, 2017, we changed our name to Holly Brothers Pictures, Inc. In February 2018, we ceased this business and commenced our blockchain mining business through our acquisition of Power Blockchain described below.

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Our business plan launched in February 2018 was to build a cryptocurrency mining operation, operating specialized computers (also known as “crypto-currency miners") that generate cryptocurrency (primarily Bitcoin).  A bitcoin is an asset that can be transferred among parties via the Internet, but without the use of a central administrator or clearing agency. The term decentralized is often used in descriptions of bitcoin, in reference to bitcoin’s lack of necessity for administration by a central party.

Through our subsidiary, Power Blockchain LLC (“Power Blockchain”), we began operating a start-up venture in February 2018 that specializes in blockchain mining for the Bitcoin network, the computer intensive process required to verify and record the digital exchange of money for crypto-currency transactions. In exchange for processing these complex mathematical equations, we would be rewarded with digital currency. We have yet to commence meaningful operations and are currently holding those business plans in suspense.

On February 1, 2018, we entered into an exchange agreement pursuant to which we acquired 100% of the equity interests in Power Blockchain from the owners of Power Blockchain in exchange for the issuance for convertible notes in aggregate principal amount of $2.2 million. The notes: (i) mature five years from the date of issuance: (ii) accrue interest at 5% per annum; (iii) require repayment in four equal installments on the second, third, fourth and fifth anniversary dates after issuance; and (iv) are convertible at the option of the holder into our common stock at a conversion price of $0.13 per share. Upon consummation of the exchange agreement, Power Blockchain became our wholly owned subsidiary.  Power Blockchain had outstanding debt obligations in aggregate principal amounts of $570,000, accruing interest at rates between 12-13% per annum, which obligations were overdue and in default. In March 2018, the Power Blockchain debt holders commenced a lawsuit against us in San Diego Superior Court, in connection with outstanding and overdue debt obligations. On March 22, 2018, we agreed to enter into a conditional settlement with the debt holders. The settlement agreement calls for the periodic issuance to the debt holders, subject to certain ownership and temporal limitations, of an aggregate of up to 3,078,000 and 3,157,000 shares respectively, exempted from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, and the California Corporations Code Section 25017(f)(3), as amended, after a fairness hearing evaluating the relative merits of the proposed agreement, which was held and approved on April 2, 2018.

On February 14, 2018, we were granted permission from the Kingdom of Lesotho to conduct crypto-currency mining operations in Lesotho. As part of this permission, we were permitted to operate by the Lesotho Electricity Company and we negotiated an electric rate agreement. As of the date of this report, we owned 70 crypto-currency miners and Power Control Units (PCU), 50 of which have been installed in Lesotho, 10 of which are in customs in South Africa, and 10 of which are in storage in South Africa. We commenced mining operations in Lesotho but have not generated any revenues to date.  Due to current economic and market conditions, we have decided to suspend the Company’s cryptocurrency mining operations in the Kingdom of Lesotho beginning around the middle of 2018.  However, we still maintain ownership and control of the miners and other equipment used in the cryptocurrency mining operations in that country (notwithstanding the fact that the cost associated with these assets has been fully reserved on the Company’s Balance Sheet since March 31, 2018).

Results of Operations

The following discussion pertains to the Company’s operating and other expenses for the years ended March 31, 2019 and 2018, as reported in our consolidated financial statements and notes thereto included in Item 8.

General and administrative expenses for the year ended March 31, 2019 were $169,690 compared to $135,682 for the year ended March 31, 2017. This increase was due to incremental overhead costs that were incurred in the Company’s transition to, and eventual halt of, its bitcoin mining business, including non-cash stock compensation expense of $43,000 (see Note 5).

Depreciation expense for the year ended March 31, 2019 was zero compared to $16,393 for the year ended March 31, 2018.  Depreciation for the year ended March 31, 2018 represented the initial period amount of such expense applicable to the Company’s computers and equipment deployed on the bitcoin mining operations in Lesotho.

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Impairment of Goodwill for the year ended March 31, 2019 was zero compared to $2,200,000 for the year ended March 31, 2018. As of the fiscal year ended March 31, 2018, we determined that it would be appropriate to recognize an impairment adjustment in the full amount of $2,200,000 on the Goodwill that was originally established upon the Company’s acquisition of Power Blockchain in February 2018 in the amount of $2,200,000, due to unforeseen economic and market conditions that arose soon after the acquisition (see Note 4).

Impairments of property and equipment and of other intangible assets for the year ended March 31, 2019 were both zero, compared to $170,186 and $2,044, respectively, for such impairment amounts in the year ended March 31, 2018. Most significantly, we recognized the impairment adjustment in the amount of $170,186 to reduce the carrying value of the property and equipment deployed in the bitcoin mining operations to zero as of March 31, 2018 (see Note 4).

Interest expense for the year ended March 31, 2019 was $180,531 compared to $28,609 for the year ended March 31, 2018. This increase was due to the interest expense applicable to the Company’s long-term debt obligations that were incurred beginning in February 2018 for the acquisition of Power Blockchain and for other purposes (see Note 6).

Gain on sale of Bitcoin for the year ended March 31, 2019 was $1,380 versus zero for the year ended March 31, 2018. This increase was due to the non-recurring sale of all of the Company’s internally-generated Bitcoin in November 2018 (see Note 12).

Liquidity and Capital Resources

Operating activities.  Net cash used in operating activities for the year ended March 31, 2019 was $106, 663 compared to $129,854 for the year ended March 31, 2018.  These fairly comparable amounts reflect the overhead costs that were incurred in the Company’s transition to, and eventual halt of, its bitcoin mining business.

Investing activities.  Net cash used in investing activities for the year ended March 31, 2019 was zero compared to $38,620 for the year ended March 31, 2018.  For the year ended March 31, 2018, the Company incurred total capital expenditures of $186,579, on computers and equipment for its bitcoin mining operations in Lesotho, of which $38,620 was funded from its own cash resources and the remainder was funded by a group of investors to whom the Company issued short-term promissory notes bearing interest at 10% per annum.

Financing activities.  Net cash provided by financing activities for the year ended March 31, 2019 was $95,700 compared to $173,376 for the year ended March 31, 2018.  This decrease was largely due to the higher level of short term borrowings provided by various related parties in the 2018 fiscal year in order to fund the increased overhead costs that were incurred in the Company’s transition to, and eventual halt of, its bitcoin mining business.

As disclosed in Note 6, the Company has incurred substantial long-term debt obligations in the acquisition of Power Blockchain in February 2018, as well as for increased overhead and other costs related to the Company’s transition to, and eventual halt of, its bitcoin mining business. The following table sets forth the contractual obligations under our long-term debt agreements as of March 31, 2019 (in thousands):

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We have not generated recurring revenue from our crypto-currency mining operations. Accordingly, we will need to raise additional capital to fund our future operations. Until such time that we can generate substantial revenue from operations, if ever, we expect to finance our operating activities through a combination of equity offerings and debt financings and we may seek to raise additional capital through strategic collaborations.

However, we may be unable to raise additional funds or enter into such arrangements when needed on favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our operations. Failure to receive additional funding could cause us to cease operations, in part or in full. Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations, which may cause dilution to our existing stockholders.

Off-Balance Sheet Transactions

We do not engage in off-balance sheet transactions.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has reported net losses from continuing operations in the last two years and has suffered recurring losses totaling $2,976,835 since inception.  These factors, among others, indicate that there is substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.  The consolidated financial statements do not contain any adjustments to reflect the possible future effects on the classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

Critical Accounting Policies and Significant Judgments and Estimates

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The current accounting polices surrounding the mining of crypto-currency are in a state of evolution and are subject to possible change by accounting standard setters and/or other legal or regulatory bodies in the future.  At the present time, we do not believe that any such accounting policies applicable to our crypto-currency mining activities require any especially difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

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

The consolidated financial statements required by this item are set forth beginning in Item 15 of this report and are incorporated herein by reference.

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There have been no disagreements with our independent registered public accountants on accounting or financial disclosure matters during our two most recent fiscal years.

Evaluation of Disclosure Controls and Procedures.

Our management, including our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Form 10-K. Based on this evaluation, our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), concluded that as a result of the material weakness in our internal controls over financial reporting discussed below, our disclosure controls and procedures were not effective at ensuring that information required to be disclosed in the reports 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 management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding disclosure.

Attestation Report of the Registered Public Accounting Firm

Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting.

Management's Report on Internal Control Over Financial Reporting

Our principal executive officer and our principal accounting and financial officer, are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Management conducted an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2019. In making this assessment, management used the criteria described in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment using those criteria, management concluded that our internal controls over financial reporting were not effective at the reasonable assurance level, primarily due to a lack of segregation of duties in financial reporting, as of March 31, 2019, and continue to be ineffective.  To the extent practical in light of its current financial condition, the Company will consider expanding financial reporting resources in the future.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

In light of the material weakness described above, we performed additional analysis and other post-closing procedures to ensure our consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

None.

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The following table sets forth certain information, with respect to our current directors and executive officers as of July 9, 2019.

Directors serve until the next annual meeting of the shareholders; until their successors are elected or appointed and qualified, or until their prior resignation or removal. Officers serve for such terms as determined by our board of directors. Each officer holds office until such officer’s successor is elected or appointed and qualified or until such officer’s earlier resignation or removal. No family relationships exist between any of our present directors and officers.

The following is a brief account of the business experience during the past five years or more of each of our directors and executive officers.

Brent Willson. Brent Willson has served as a director and as our president, chief executive officer since January 2018. Col Willson recently retired after 30-years of distinguished service with the United States Marine Corps. Col Willson rose to the rank of USMC Colonel where he was responsible for large acquisitions, security, facilities and infrastructure. At the Office of the Secretary of Defense Acquisition, Col Willson was responsible for managing the DoD’s portfolio of helicopters and tilt-rotor aircraft.  Since March 2018, Col Willson has served as a director and as president and chief executive officer of NeoVolta, Inc., an intelligent home energy storage system company, and has accordingly devoted a lesser percentage of his time to the business affairs of the Company since then.  Col Willson holds a BS in Business Administration, a Masters of Military Science and a Masters of National Security and Strategic Studies. We believe Col Willson’s background in managing large portfolios and his educational background qualifies him to serve as a director of the company.

Steve Bond. Steve Bond has served as a director and as our chief financial officer since January 2018. Over the last 15 years, Steve Bond has worked with over 100 companies as a consulting executive in finance, strategy and revenue growth. Since March 2018, Mr. Bond has served as a director and as chief financial officer of NeoVolta, Inc., an intelligent home energy storage system company, and has accordingly devoted a lesser percentage of his time to the business affairs of the Company since then.  Mr. Bond has been active in the San Diego Rotary Club and serves on the Board of Promises to Kids. Mr. Bond graduated Summa Cum Laude in Finance from San Diego State University in 2000. We believe Mr. Bond’s consulting experience and his educational background qualifies him to serve as a director of the company.

Board Committees

We have not yet established any committees of our Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. The entire Board of Directors performs all functions that would otherwise be performed by committees. If we are able to grow our business and increase our operations, we intend to expand the size of our Board and allocate responsibilities accordingly.

Audit Committee Financial Expert

We have no separate audit committee at this time. The entire Board of Directors oversees our audits and auditing procedures. Given the present size of our Board, we do not believe that it is practical for us to have committees.

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Shareholder Communications

We do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations.

Code of Ethics

We have not adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. We intend to adopt a code of ethics in the near future.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.  Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that all reports were filed for the fiscal year, except for a Form 3 and Form 4, which reported one transaction, for each of Col Willson and Mr. Bond, which forms were filed on February 21, 2018.

Effective January 25, 2018, our board of directors appointed Brent Willson and Steve Bond as members of the board of directors, and on such date, Anton Yeranossian resigned from the board of directors and as CEO of the Company. On January 29, 2018, we appointed Col Willson to serve as our Chief Executive Officer and President, and Steve Bond to serve as our Chief Financial Officer.

Our named executive officers for the fiscal years ended March 31, 2019 and 2018, which consist of all individuals that served as our principal executive officer during the fiscal years and our other most highly compensated executive officer, are: (i) Brent Willson, our director, president and chief executive officer; (ii) Steve Bond, our director and chief financial officer; and (ii) Anton Yeranossian, our former chief executive officer.

Summary Compensation Table

(1)Represents the amortized portion of the grant date fair value of the stock awards granted calculated in accordance with FASB ASC Topic 718. These amounts are determined in accordance with the provisions of FASB ASC Topic 718, rather than an amount paid to or realized by the executive officer.  For a description of these stock awards, see Note 5 to the Company’s consolidated financial statements. 

(2)Col Willson joined the Company on January 25, 2018. The amount shown in the first column represents the payments made by the Company to Col Willson from the start date of his engagement through March 31, 2018.  Such payments were made to Col Willson in his capacity as a contractor, not as an employee, and include any payments made to his personal consulting company. 

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(3)Mr. Bond joined the Company in January 25, 2018. The amount shown in the first column represents the payments made by the Company to Mr. Bond from the start date of his engagement through March 31, 2018. Such payments were made to Mr. Bond in his capacity as a contractor, not as an employee. 

(4)Mr. Yeranossian served the Company’s sole executive officer and director through January 25, 2018. The Company did not pay Mr. Yeranossian any compensation for his services as an executive officer or director. 

Equity Awards

The Company: (i) did not grant any stock options to its executive officers or directors from inception through fiscal year end March 31, 2019 and March 31, 2018; (ii) did not have any outstanding equity awards as of March 31, 2019; and (iii) had no options exercised by its named executive officer in fiscal years ending March 31, 2019 and March 31, 2018.

Employment and Consulting Agreements

On January 29, 2018, the Company entered into an at-will employment agreement, which was subsequently amended, with Colonel Brent Willson pursuant to which Col. Willson agreed to serve as Chief Executive Officer and President of the Company commencing on such date.  Contemporaneous with Col. Willson’s execution of the agreement, Col. Willson purchased from the Company 750,000 shares of Company common stock at a purchase price of $0.001 per share. This stock grant was structured so that it is fully vested over a three year period and is subject to buyback by the Company if Col. Willson should leave the Company before then.  Further, the Company entered into a subsequent consulting agreement with Canmore International Inc., an entity controlled by Col. Willson, to provide it with consulting, marketing, design and public relations work, pursuant to which it has agreed to pay Canmore International Inc. fees generally equal to 66-2/3% of the amount to which Col. Willson would otherwise be entitled to receive for his services. The consulting agreement is terminable by either party at any time upon 30 days’ notice.

On January 29, 2018, the Company entered into an at-will employment agreement with Mr. Steve Bond pursuant to which Mr. Bond agreed to serve as Chief Financial Officer of the Company commencing on such date. Contemporaneous with Mr. Bond’s execution of the agreement, Mr. Bond purchased from the Company 250,000 shares of Company common stock at a purchase price of $0.001 per share. This stock grant was structured so that it is fully vested over a three year period and is subject to buyback by the Company if Mr. Bond should leave the Company before then.

Compensation of Directors

Our directors do not receive any compensation for serving as such. As of the date hereof, there were no other arrangements between us and our directors that resulted in our making payments to any of our directors for any services provided to us by them as directors.

The following tables set forth certain information regarding the beneficial ownership of our common stock as of July 9, 2019 of (i) each person known to us to beneficially own more than 5% of our common stock, (ii) our directors, (iii) each named executive officer, and (iv) all directors and named executive officers as a group. As of July 9, 2019, there were a total of 1,204,000 shares of common stock outstanding. Each share of common stock is entitled to one vote on matters on which holders of voting stock of the Company are eligible to vote. The column entitled “Percent” shows the percentage of voting common stock beneficially owned by each listed party.

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The number of shares beneficially owned is determined under the rules promulgated by the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under those rules, beneficial ownership includes any shares as to which a person or entity has sole or shared voting power or investment power plus any shares which such person or entity has the right to acquire within sixty (60) days of July 9, 2019, through the exercise or conversion of any stock option, convertible security, warrant or other right. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares such power with that person’s spouse) with respect to all shares of capital stock listed as owned by that person or entity.

(1)The shares in the table are subject to the Company’s right to buyback the shares as described in Item 11. Executive Compensation under the section “Employment and Consulting Agreements.”  

(2)Mr. Yeranossian resigned as a director and officer on January 25, 2018. 

(3)Includes the shares held by Col Wilson and Mr. Bond. 

Prior Office Space

Until January 25, 2018, the Company’s former director, Anton Yeranossian, contributed office space for the Company’s use at no charge to the Company. The office space contributed was at the same location as A&A Medical Supply, a medical supply company managed by Anton Yeranossian.

Prior Service Agreement

The Company was party to a Service Agreement with A&A Medical Supply, LLC until the agreement was terminated on January 25, 2018.  The Company’s former officer and director, Mr. Yeranossian, is CEO of A&A Medical Supply and A&A Medical Supply is owned by the parents of Mr. Yeranossian.  The material terms of the Service Agreement between the Company and A&A Medical Supply were as follows: (i) the agreement gave the Company the right of first refusal to rebuild any wheelchairs returned to A&A Medical Supply, LLC; (ii) A&A agreed to provide the Company with wheelchairs in need of repair and provide the Company the specifications to rebuild the wheelchair for A&A’s client; (iii) the Company agreed to provide overall quality control, logistics in ordering the replacement components, the management and administrative duties with respect to rebuilding wheelchairs; and (iv) the wheelchairs must meet the specifications to qualify for Medicare/insurance reimbursement. When the wheelchairs were rebuilt to the satisfaction of A&A, the Company was permitted to bill A&A for parts and labor.

Director Independence

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the Board of Directors be “independent” and, as a result, we are not at this time required to (and we do not) have our Board of Directors comprised of a majority of “Independent Directors.”

15

Our Board of Directors has considered the independence of its Directors in reference to the definition of “Independent Director” established by the Nasdaq Marketplace Rule 5605(a)(2). In doing so, the Board of Directors has reviewed all commercial and other relationships of each director in making its determination as to the independence of its Directors. After such review, the Board of Directors has determined none of our directors qualifies as independent under the requirements of the Nasdaq listing standards.

AMC Auditing, LLC ("AMC") served as the Company’s independent registered public accounting firm since 2016. Effective February 1, 2019, AMC was acquired by a new auditing firm, Prager Metis CPA’s LLP (“Prager”), and all of the employees of AMC joined Prager. Aggregate fees for professional services rendered by Prager for the fiscal year ended March 31, 2019 and by AMC for the fiscal year ended March 31, 2018, respectively, were as follows:

Audit and Quarterly Review Fees

Audit fees represent the aggregate fees billed for professional services rendered by our independent accounting firm for the audit of our annual financial statements, review of financial statements included in our quarterly reports, review of registration statements or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years.

Audit-related fees represent the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under Audit Fees.

Tax fees represent the aggregate fees billed for professional services rendered by our principal accountants for tax compliance, tax advice, and tax planning for such years.

All other fees represent the aggregate fees billed for products and services other than the services reported in the other categories.

We do not have an audit committee. Our Board of Directors performs the function of an audit committee. Section 10A(i) of the Exchange Act prohibits our auditors from performing audit services for us as well as any services not considered to be audit services unless such services are pre-approved by our audit committee or, in cases where no such committee exists, by our Board of Directors (in lieu of an audit committee) or unless the services meet certain de minimis standards.

16

(a)Documents filed as part of this Report 

1.Financial Statements 

The consolidated financial statements and notes thereto which are attached hereto beginning on page F-1 have been included by reference into Item 8 of this part of the annual report on Form 10-K. See the Index to Consolidated Financial Statements on page F-1.

2.Financial Statement Schedules 

All schedules are omitted because they are inapplicable or not required or the required information is shown in the consolidated financial statements or notes thereto.

3.Exhibits 

The information required by this Item is set forth in the Exhibit Index that follows the signature page of this Annual Report.

EXHIBIT INDEX

17

*Filed herewith. 

**Denotes a management contract or compensatory plan or arrangement. 

18

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: July 9, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

19

Holly Brothers Pictures, Inc.

Financial Statements

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

To the Board of Directors and Stockholders of

Holly Brothers Pictures, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Holly Brothers Pictures, Inc. . (the “Company”) as of March 31, 2019 and the related statements of operations, stockholders’ (deficit), and cash flows for the year ended March 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2019, and the results of its operations and its cash flows for the year ended March 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

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

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has negative working capital at March 31, 2019, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Prager Metis CPAs, LLP

We have served as the Company’s auditor since 2019

El Segundo, California

July 9, 2019

F-2

To the Board of Directors and Stockholders of

Holly Brothers Pictures, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Holly Brothers Pictures, Inc. (the “Company”) as of March 31, 2018 and the related statements of operations, stockholders’ equity, and cash flows for the year ended March 31, 2018, and the related notes (collectively referred to as the “financial statements”).   In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2018, and the results of its operations and its cash flows for the year ended March 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

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

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 3 to the financial statements, the Company has no revenues, has negative working capital at March 31, 2018, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 3.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ AMC Auditing

AMC Auditing

We have served as the Company’s auditor since 2016

Las Vegas, Nevada

November 30, 2018

F-3

Holly Brothers Pictures, Inc.

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

F-4

Holly Brothers Pictures, Inc.

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

F-5

Holly Brothers Pictures, Inc.

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

F-6

Holly Brothers Pictures, Inc.

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

F-7

Holly Brothers Pictures, Inc.

March 31, 2019 and 2018

NOTE 1. General Organization and Business

Holly Brothers Pictures, Inc. is a Nevada Corporation incorporated in the State of Nevada on February 22, 2013 as PowerMedChairs, and is considered to be an emerging growth company under applicable federal securities laws. On June 2, 2017, the Company changed its name to Holly Brothers Pictures, Inc.  On February 1, 2018, the Company acquired 100% of the equity interests in Power Blockchain, LLC (“Power Blockchain”) through an exchange agreement in a transaction that resulted in the transition from the Company’s existing business of repairing and selling wheelchairs to a planned new business of mining crypto-currency (see Note 4). The Company’s mining operations were halted in mid-2018, however, with the recent increase in the quoted market price of Bitcoin, the Company is presently in the process of performing a preliminary evaluation of the feasibility of resuming its Bitcoin mining operations.

NOTE 2. Summary of Significant Accounting Policies

Basis of Accounting

The basis is United States generally accepted accounting principles.  The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Power Blockchain, since February 1, 2018.

Cash and Cash Equivalents

The Company considers all short-term investments with a maturity of three months or less at the date of purchase to be cash and cash equivalents.

Earnings per Share

The basic earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares issued and outstanding during the year. The diluted earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted as of the first year for any potentially dilutive debt or equity.

The Company has not issued any options or warrants or similar securities since inception.

Fair value of financial instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 2019 and 2018. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market.

F-8

Holly Brothers Pictures, Inc.

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

Fair value of financial instruments (Continued)

Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.

Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.

Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.

Revenue recognition

The Company has not recorded any revenues from Inception through March 31, 2019. If and when the Company should have any revenues under contracts with customers, it will follow the five step accounting process for revenue recognition under ASC 606, “Revenue from Contracts with Customers.”

Goodwill

We periodically evaluate goodwill arising from business combinations by applying a goodwill impairment test, both qualitatively and, quantitatively, if necessary, in accordance with the provisions of ASC 350, Intangibles - Goodwill and Other (see Note 4). As disclosed in Note 4, the Company recognized a goodwill impairment allowance in the year ended March 31, 2018 in the amount of $2,200,000.

Property and Equipment

Computers, equipment and software are generally depreciated on a straight-line basis over their estimated useful lives ranging up to three years (see Note 4).

Bitcoin

Internally-generated Bitcoin is recorded as Other Assets at the lower of cost or market value based on industry standard quoted prices for Bitcoin.

Dividends

The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid during the period shown.

Income Taxes

The provision for income taxes is the total of the current taxes payable and the net of the change in the deferred income taxes. Provision is made for the deferred income taxes where differences exist between the period in which transactions affect current taxable income and the period in which they enter into the determination of net income in the financial statements.

F-9

Holly Brothers Pictures, Inc.

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

Year-end

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

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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. Actual results could differ from those estimates.

Subsequent Events

Management has evaluated any subsequent events occurring in the period from March 31, 2019 through the date the financial statements were issued, to determine if disclosure in this report is warranted. (See Note 13)

NOTE 3. Going concern

The Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has not commenced its planned principal operations and it has not generated any revenues and has suffered recurring losses totaling $2,976,835 since inception. These factors, among others, indicate that there is substantial doubt about the Company’s ability to continue as a going concern. In order to obtain the necessary capital, Management’s plans include, among other things, the possibility of pursuing new equity sales and/or making additional debt borrowings in order to fund operations. There can be no assurances, however, that the Company will be successful in obtaining such additional financing. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from the outcome of this uncertainty.

NOTE 4. Acquisition of Power Blockchain

Effective February 1, 2018, the Company acquired 100% of the equity interests in Power Blockchain through an exchange agreement between the Company and the two owners of Power Blockchain. Pursuant to the exchange agreement, the sole consideration in this transaction was the issuance by the Company of unsecured convertible notes payable to the two owners of Power Blockchain in the amount of $2,200,000. Such notes payable were structured to: (i) mature five years from the date of issuance, (ii) accrue interest at the rate of 5% per annum, (iii) require repayment in four equal installments beginning on the second anniversary of issuance, and (iv) are convertible into the Company’s common stock at a conversion price of $0.13 per share. The Company performed an analysis to determine whether there was a beneficial conversion feature and noted none.

We have accounted for the acquisition of Power Blockchain as a business combination, with the Company treated as the acquirer, in accordance with the provisions of ASC 805, Business Combinations. At the time of the transaction, Power Blockchain was a start-up venture with little or no identifiable assets or operations, therefore, we allocated the entire merger consideration in the amount of $2,200,000 to the category of Goodwill for accounting purposes.

F-10

Holly Brothers Pictures, Inc.

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

Due to unforeseen economic and market conditions that arose as of March 31, 2018, Management determined to suspend the bitcoin mining operations until such time as the industry conditions improve.  The Company  believes that the results of the Company’s initial bitcoin mining operations through the Power Blockchain entity should be considered inconclusive to date, with no revenues yet recorded during the year ended March 31, 2018, nor expected in the near future. And as a result of these conditions, and the uncertainty of any future cash flows,we determined during the year ended March 31, 2018 that it would be appropriate to recognize an impairment adjustment in the full amount of $2,200,000 in the year ended March 31, 2018, in order to reduce the carrying value of the Goodwill to zero as of March 31, 2018. Additionally, due to the expected loss of utility of its deployed assets, we recognized an impairment adjustment in the amount of $170,186 to reduce the carrying value of the property and equipment deployed in the bitcoin mining operations to zero as of March 31, 2018. It should be noted, however, that with the recent increase in the quoted market price of Bitcoin, the Company is presently in the process of performing a preliminary evaluation of the feasibility of resuming its Bitcoin mining operations.

NOTE 5. - Stockholders' Equity and Contributed Capital

On January 25, 2018, in conjunction with the acquisition of Power Blockchain, the Company purchased a total of 2,661,172 shares of its common stock from the former management group for a negotiated payment in the amount of $340,000, or $0.13 per share, which has been accounted for as Treasury Stock.

On January 29, 2018, also in conjunction with the acquisition of Power Blockchain, the Company issued a total of 1,000,000 shares of common stock, at a purchase price of $0.001 per share, to two new officers who were engaged to affect the transition to the business of bitcoin mining.  These stock grants were structured so that they are fully vested over a three year period and are subject to buyback by the Company if either officer should leave the Company before then. We have valued the stock grants at an incremental amount of $129,000, based on the negotiated price of the simultaneously purchased treasury stock noted above, and are amortizing that amount as stock compensation expense over a period of three years (of that amount, $43,000 and $7,167 was amortized in the years ended March 31, 2019 and 2018, respectively).

Taking the above transactions into consideration, as well as the conversion of a $45,000 note payable into 155,172 shares of common stock in December 2017, the Company had a total of 1,204,000 shares of common stock issued and outstanding as of March 31, 2019 and 2018.

There have been no issuances of stock options or warrants.  However, in March 2018, the Board approved the establishment of a new 2018 Stock Option Plan with an authorization for the issuance of up to 1,000,000 shares of common stock. The Plan is designed to provide for future discretionary grants of stock options, stock awards and stock unit awards to key employees and non-employee directors.

F-11

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

NOTE 6. Notes Payable

The Company performed an analysis of the convertible notes payable to determine whether there was a beneficial conversion feature and noted none.

Future maturities of long-term debt as of March 31, 2019 are as follows:

At the time of the Power Blockchain acquisition, Power Blockchain had outstanding unsecured notes payable to the two owners in the amount of $570,000, which were overdue and in default. Shortly thereafter, the Company entered into negotiations with the note holders (the “Plaintiffs”) in an attempt to settle these obligations. As a result of those efforts, a settlement agreement was reached in March 2018 to convert the notes payable into the right for the two note holders to receive periodic issuances of the Company’s common stock of up to approximately 3,000,000 shares each, that would be exempted from registration pursuant to Section 3(a)(10) of the Securities Act of 1933. The settlement agreement stipulated that the issuance of such shares shall occur in respective tranches such that the resulting number of shares owned by each holder would not exceed 4.9% of the Company’s then outstanding shares of common stock. Per the settlement agreement, the Plaintiffs’ right to make requests for periodic tranche issuances shall expire on September 17, 2019. Thereafter, the Company shall have no obligation to issue shares to either Plaintiff. In the agreement the Plaintiffs acknowledged that they may be unable to sell, prior to the expiration of their right to make requests for periodic tranche issuances, a sufficient number of shares to recoup the debt and they expressly assumed that risk. As at the date of settlement it was not known if any shares would be requested to be issued prior to the expiration date, and the Plaintiffs accepted risk, the Company could not estimate an amount of shares to be issued, and therefore no amount was recognized for the settlement. To date, no such shares have been issued.

F-12

Holly Brothers Pictures, Inc.

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

NOTE 7. Related Party Transactions

In the year ended March 31, 2018, the Company entered into several transactions with various related parties to: (i) purchase shares of Treasury Stock from the former management team, (ii) issue new shares of common stock to officers, and (iii) convert notes payable into shares of common stock, as more fully described in Note 5.

The Company does not lease or rent any property.  In the years ended March 31, 2019 and 2018, office services are provided without charge by a director. Such costs are immaterial to the consolidated financial statements and, accordingly, have not been reflected therein. The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.

NOTE 8. Provision for Income Taxes

The Company accounts for income taxes under FASB Accounting Standard Codification ASC 740 "Income Taxes". ASC 740 requires use of the liability method. ASC 740 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.

As of March 31, 2019, the Company had net operating loss carry forwards of approximately $305,841, after taking certain non-deductible items into account, as compared to $345,747 at March 31, 2018, that may be available to reduce future years' taxable income.  Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. Net operating losses will begin to expire in 2030.

Components of net deferred tax assets, including a valuation allowance, are as follows at March 31, 2019 and March 31, 2018:

F-13

Holly Brothers Pictures, Inc.

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

The valuation allowance for deferred tax assets for the year ending March 31, 2019 was $64,200, as compared to $(72,600) for the same period last year.  In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of March 31, 2019. The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences are as follows:

At March 31, 2019, we had an unused net operating loss carryover approximating $726,700, after taking certain non-deductible items into account, that is available to offset future taxable income which expires beginning 2038.

NOTE 9. Operating Leases and Other Commitments

The Company has no lease or other obligations.

NOTE 10. Recent Accounting Pronouncements

The Company's management has evaluated all the recently issued accounting pronouncements through the filing date of these consolidated financial statements and does not believe that any of these pronouncements will have a material impact on the Company's financial position and results of operations.

NOTE 11. Litigation

From time to time in the ordinary course of our business, we may be involved in legal proceedings, the outcomes of which may not be determinable. The results of litigation are inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time and result in diversion of significant resources. We are not able to estimate an aggregate amount or range of reasonably possible losses for those legal matters for which losses are not probable and estimable, primarily for the following reasons: (i) many of the relevant legal proceedings are in preliminary stages, and until such proceedings develop further, there is often uncertainty regarding the relevant facts and circumstances at issue and potential liability; and (ii) many of these proceedings involve matters of which the outcomes are inherently difficult to predict. We have insurance policies covering potential losses where such coverage is cost effective.

We are not at this time involved in any legal proceedings.

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Holly Brothers Pictures, Inc.

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

NOTE 12. Sale of Bitcoin

In November 2018, the Company sold all of its internally-generated Bitcoin for a cash sales price of $5,140.  The Company recognized a one-time gain on this non-recurring sale in the year ended March 31, 2019 in the amount of $1,380.

NOTE 13. Subsequent Events

In the month of May 2019, the Company made additional short-term borrowings from two related parties in the total amount of $14,000 on the same terms as the borrowings made through March 31, 2019.  There have been no other reportable subsequent events that have occurred since March 31, 2019.

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