SECTOR 10, Inc. - Annual Report: 2019 (Form 10-K)

Delaware	33-0565710
State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

Title of Each Class	Name of Each Exchange on Which Registered
None	None

		Page
	PART I
ITEM 1.	DESCRIPTION OF BUSINESS	3
ITEM 2.	DESCRIPTION OF PROPERTY	3
ITEM 3.	LEGAL PROCEEDINGS	3
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	4
	PART II
ITEM 5.	MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES	4
ITEM 6.	SELECTED FINANCIAL DATA	4
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION	5
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	8
ITEM 8.	FINANCIAL STATEMENTS	10
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	21
ITEM 9A.	CONTROLS AND PROCEDURES	22
ITEM 9B.	OTHER INFORMATION	23
	PART III
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	24
ITEM 11.	EXECUTIVE COMPENSATION	25
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	26
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	27
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	27
ITEM 15.	EXHIBITS	28
	SIGNATURES	29
	CERTIFICATIONS

Date		Volume				Open				High				Low				Close
3/29/2019			-				5.00				5.00				5.00				5.00
2/28/2019			170				8.00				8.00				8.00				8.00
1/31/2019			-				9.00				9.00				9.00				9.00
12/31/2018			-				9.00				9.00				9.00				9.00
11/30/2018			-				9.00				9.00				9.00				9.00
10/31/2018			-				9.00				9.00				9.00				9.00
9/28/2018			-				21.01				21.01				21.01				21.01
8/31/2018			-				0.65				0.65				0.65				0.65
7/31/2018			-				0.80				0.80				0.80				0.80
6/29/2018			-				0.95				0.95				0.95				0.95
5/31/2018			-				1.00				1.00				1.00				1.00
4/30/2018			1,550				0.95				0.95				0.90				0.93
3/29/2018			524				1.00				1.00				1.00				1.00

Depreciation Expense –

		Year Ended				Year Ended
		March 31,				March 31,
Sources and Uses of Cash		2019				2018
Net cash provided by / (used in)
Operating activities		$	0			$	0
Investing activities			0				0
Financing activities			0				0
Increase/(decrease) in cash and cash equivalents		$	0			$	0
Years ended March 31, 2019 and 2018
Cash and cash equivalents		$	0			$	0

●	intentional manipulation of our stock price by existing or future stockholders;
●	short selling of our common stock or related derivative securities;
●	a single acquisition or disposition, or several related acquisitions or dispositions, of a large number of our shares;
●	the interest, or lack of interest, of the market in our business sector, without regard to our financial condition or results of operations;
●	the adoption of governmental regulations and similar developments in the United States or abroad that may affect our ability to offer our products and services or affect our cost structure;
●	developments in the businesses of companies that purchase our products; and
●	economic and other external market factors, such as a general decline in market prices due to poor economic indicators or investor distrust.
●	Our business may be affected by increased compensation and benefits costs.

●	Is priced under five dollars;
●	Is not traded on a national stock exchange, the Nasdaq Global Market or the Nasdaq Capital Market;
●	Is issued by a company that has less than $5 million in net tangible assets (if it has been in business less than three years) or has less than $2 million in net tangible assets (if it has been in business for at least three years); and
●	Is issued by a company that has average revenues of less than $6 million for the past three years.

●	Certain broker-dealers who recommend penny stock to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to a transaction prior to sale.
●	Prior to executing any transaction involving a penny stock, certain broker-dealers must deliver to certain purchasers a disclosure schedule explaining the risks involved in owning penny stock, the broker-dealer’s duties to the customer, a toll-free telephone number for inquiries about the broker-dealer’s disciplinary history and the customer’s rights and remedies in case of fraud or abuse in the sale.
●	In connection with the execution of any transaction involving a penny stock, certain broker-dealers must deliver to certain purchasers the following:
	•	bid and offer price quotes and volume information;
	•	the broker-dealer’s compensation for the trade;
	•	the compensation received by certain salespersons for the trade;
	•	monthly accounts statements; and
	•	a written statement of the customer’s financial situation and investment goals.

		March 31, 2019				March 31, 2018
ASSETS		(Unaudited)				(Unaudited)
Current assets:
Cash		$	-			$	-
Inventory, net			-				-
Total current assets			-				-
Fixed assets cost			22,250				22,250
Less: accumulated depreciation			(22,250	)			(22,250	)
Net fixed assets			-				-
Other assets - Network acquisition/development costs			-				-
Total assets		$	0			$	0
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities		$	10,234,025			$	8,928,642
Note payable - short term			803,615				803,615
Total current liabilities			11,037,640				9,732,257
Long term liabilities:
Note payable			-				-
Total long term liabilities			-				-
Total liabilities			11,037,640				9,732,257
Shareholders' equity (deficit)
Preferred shares - $0.001 par value; 1,000,000 authorized, no shares issued or outstanding			-				-
Common shares - $0.001 par value; 199,000,000 authorized; 305,778  and 305,778 shares issued and outstanding, respectively			306				306
Additional paid-in-capital			6,148,229				6,148,229
Deficit accumulated during development stage			(17,186,175	)			(15,880,792	)
Total shareholders' equity (deficit)			(11,037,640	)			(9,732,257	)
Total liabilities and shareholders' equity (deficit)		$	0				0

		Years Ended								Inception to
		March 31, 2019				March 31, 2018				March 31, 2019
		(Unaudited)				(Unaudited)
Sales		$	-			$	-			$	18,500
Cost of Sales			-				-				(18,032	)
Gross Profit			-				-				468
Expenses:
General and administrative			832,025				800,575				13,578,148
Depreciation			0				0				24,106
Research and development			0				0				226,108
Total expenses			832,025				800,575				13,828,362
Income (loss) from operations			(832,025	)			(800,575	)			(13,827,894	)
Interest expense			(473,358	)			(420,557	)			(2,727,486	)
Other income (expense)			0				0				(630,795	)
Net income (loss) before income taxes			(1,305,383	)			(1,221,132	)			(17,186,175	)
Provision for income taxes			0				0				0
Net income (loss) after income taxes		$	(1,305,383	)		$	(1,221,132	)		$	(17,186,175	)
Weighted Average Shares Outstanding - basic and diluted			305,778				305,778
Basic and diluted income (loss) per share
Continuing Operations		$	(4.27	)		$	(3.99	)
Net Income (Loss)		$	(4.27	)		$	(3.99	)

		Common Stock								Additional Paid-In				Deficit Accumulated During Development
		Shares				Amount				Capital				Stage
Balance at Inception, September, 16, 2002			-			$	-			$	-			$	-
Issued Shares			10,000				10				(1,414	)			-
Net loss for the period  12/31/2002			-				-				-				(3,586	)
Net loss for the period 1/1/2003 to 3/31/2007			-				-				-				-
Recapitalization			5,464				6				(703,166	)			-
Net loss for the period 3/31/2008			-				-				-				(123,946	)
Issued Shares 3/31/2009			20,256				20				1,702,738				-
Gain on extinguishment of debt			-				-				10,850				-
Net loss for the period 3/31/2009			-				-				-				(532,775	)
Issued Shares 3/31/2010			65,099				65				3,265,424				-
Net loss for the period 3/31/2010			-				-				-				(4,587,632	)
Balance at March 31, 2010 (audited)			100,819				101				4,274,432				(5,247,939	)
Issued Shares (unaudited)			243,443				243				1,199,745				-
Adjustment to value  of stock options at 3/31/ 2011 (unaudited)			-				-				116,455				-
Discount on Convertible notes (unaudited)			-				-				206,324				-
Net loss for the period 3/31/2011 (unaudited)			-				-				-				(2,572,447	)
Issued Shares (unaudited)			(23,315	)			(23	)			76,988				-
Adjust for 500-to 1 reverse split (unaudited)			(15,169	)			(15	)			152,451				-
Adjustment to value of stock options at 3/31/2012 (unaudited)			-				-				97,048				-
Net loss for the period 3/31/2012 (unaudited)			-				-				-				(1,447,492	)
Adjustment to value of stock options at 3/31/2013 (unaudited)			-				-				24,786				-
Net loss for the period 3/31/2013 (unaudited)			-				-				-				(963,191	)
Net loss for the period 3/31/2014 (unaudited)			-				-				-				(997,806	)
Net loss for the  period 3/31/2015 (unaudited)			-				-				-				(1,074,487	)
Net loss for the period 3/31/2016 (unaudited)			-				-				-				(1,137,218	)
Net loss for the period 3/31/2017 (unaudited)			-				-				-				(1,219,080	)
Net loss for the period 3/31/2018 (unaudited)			-				-				-				(1,221,132	)
Balance at March 31, 2018 (unaudited)			305,778			$	306			$	6,148,229			$	(15,880,792	)
Net loss for the period 3/31/2019 (unaudited)			-				-				-				(1,305,383	)
Balance at March 31, 2019 (unaudited)			305,778			$	306			$	6,148,229			$	(17,186,175	)

		Years Ended								Inception to
		March 31, 2019				March 31, 2018				March 31, 2019
Cash Flows from Operating Activities:
Net Loss		$	(1,305,383	)		$	(1,221,132	)		$	(17,186,175	)
Adjustments to reconcile  net loss to net cash used in operating activities:
Stock for services			-				-				5,114,493
Depreciation			-				-				24,106
Net discount on convertible debt			-				-				206,324
Loss due to Impairment / Gain on restructuring			-				-				630,795
Changes in:
Inventory and other current assets			-				-				(4,869	)
Accounts payable and accrued liabilities			1,305,383				1,221,132				10,747,728
Net cash used in operating activities			-				-				(467,598	)
Cash Flows from Investing Activities:
Fixed asset  / Other asset purchases			-				-				(189,541	)
Net cash used in investing activities			-				-				(189,541	)
Cash Flows from Financing Activities:
Net Proceeds from general financing			-				-				737,500
Net Proceeds (payments) from shareholder / officers			-				-				(113,947	)
Proceeds from issuance of common stock			-				-				33,586
Net cash provided by financing activities			-				-				657,139
Net increase (decrease) in cash			-				-				-
Beginning of period - continuing operations			-				-				-
End of period - continuing operations		$	-			$	-			$	-
Cash paid for interest		$	-			$	-			$	24,295
Cash paid for income taxes		$	-			$	-			$	-

Inventory Share-Based Compensation Other Notes

Interest expense		March 31, 2019				March 31, 2018
Interest – Johnson			10,394				10,394
Interest – Dutro Group			36,225				36,225
Interest  - Employee Group			408,019				355,218
Interest – Other Notes			18,720				18,720
Total interest expense		$	473,358			$	420,557

Note Payable Balance		March 31, 2019				March 31, 2018
Edward Johnson – Johnson Financing		$	86,615			$	86,615
Various Individuals – Other Notes			169,000				169,000
Asher Enterprises, Inc. – Other Notes			65,000				65,000
Vicki Davis -  Dutro Group			168,000				168,000
William Dutro – Dutro Group			65,000				65,000
Dutro Company – Dutro Group			250,000				250,000
Total Note Payable – short term		$	803,615			$	803,615
Total Note Payable – long term			-			$	-
Total Notes Payable		$	803,615			$	803,615

Fiscal Year		Amount
March 31, 2020			803,615
March 31, 2021			-
March 31, 2022			-
Total		$	803,615

Net deferred tax assets /liabilities consist of the following components as of March 31, 2019 and 2018:

		March 31, 2019				March 31, 2018
Deferred tax assets:
NOL Carryover		$	433,761			$	433,761
Related Party Accruals			2,878,532				2,454,304
Accrued Expenses			1,112,738				1,027,866
Deferred tax liabilities
Depreciation			0				-
Valuation allowance			(4,425,031	)			(3,915,931	)
Net deferred tax asset		$	-			$	-

		March 31, 2019				March 31, 2018
Book Income		$	(509,099	)		$	(476,241	)
Depreciation			0				0
Meals & Entertainment			0				0
Stock for Services & Finance			0				0
Related Party Accruals			424,228				400,145
Accrued Expenses			84,872				76,097
Impairment Loss			0				0
Valuation Allowance			(1	)			(1	)
		$	-			$	-

1)	Litigation involving Dutro Company, Reality Engineering, William Dutro, Vicki Davis, Lee Allen, Valley Inception, LLC, Incisive Software Corporation and Promixex Corporation continues and is expected to continue for the foreseeable future. Counsel is preparing for defendant depositions and other discovery proceedings.  The Company expects a trial date is expected to be set before the end of the fiscal year ended March 31, 2020.
2)	The impact of the issues surrounding the litigation impact the Company’s ability to obtain funding needed to operate the Company according to their strategic plans.
3)	Federal and Stater authorities have and will continue to be updated on the litigation issues and proceedings

(a)	Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our President, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. The disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our President, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
	Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
	Our management, with the participation of the President, evaluated the effectiveness of the Company’s internal control over financial reporting as of March 31, 2019. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. The Company experienced issues in gathering all needed information to timely file the annual report for the period ended March 31, 2019.  As a result, the report was extended but filed within the time allowed under the extension.  Based on this evaluation, our Principal Executive Officer and Principal Financial Officer, concluded that, as of March 31, 2019 our internal control over financial reporting were effective.
(b)	Changes in Internal Control over Financial Reporting. There were no changes in the Company's internal controls over financial reporting, that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
	This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this annual report.

Name		Age		Title		Director or Officer Since
Pericles DeAvila		50		Chairman of the Board and Acting President, Chief Executive Officer		May 12, 2011
Laurence A. Madison		63		Director and Acting Chief Financial Officer /  Secretary / Treasurer		May 12, 2011

(1)	filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing.
(2)	was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor defenses);
(3)	was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting, the following activities:
	(i)	acting as a future commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliate person, director or employee of any investment company or engaging in or continuing any conduct or practice in connection with such activity;
	(ii)	engaging in any type of business practice; or
	(iii)	engaging in any activity in connection with the purchased or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;
(4)	was the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any federal or state authority barring, suspending, or otherwise limiting for more than 60 days the right of such person to engage in any activity described above under this Item, or to be associated with persons engaged in any such activity;
(5)	was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any federal or state securities law, and the judgment in such civil action or finding by the Securities and Exchange Commission has not been subsequently reversed, suspended, or vacated.
(6)	was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.

Name	Fiscal Year		Compensation
Peric DeAvila	2019		$	339,000
Laurence A. Madison	2019		$	321,000
Peric DeAvila	2018		$	339,000
Laurence A. Madison	2018		$	321,000
Peric DeAvila	2017		$	339,000
Laurence A. Madison	2017		$	321,000

Title of Class	Name of Beneficial Owner	Amount and Nature of Beneficial Ownership					Percentage of Class
OFFICERS, DIRECTORS AND FIVE PERCENT SHAREHOLDERS
Common	Peric DeAvila			11,391		(1)			3.72	%
Common	Laurence Madison			10,896		(1)			3.56	%
Common	Sector 10 Holdings, Inc.			151,616		(1)			49.58	%
All officers and Directors as a Group (2) Persons (2)				22,287					7.28	%
Including officer, directors and 5% shareholder				173,903					56.86	%

(1)	Anti-dilution agreements were entered into with Sector 10 Holdings, Inc. in November 2009 and officers Peric DeAvila and Laurence Madison in February 2010.  The above percentages do not reflect all shares that the anti-dilution provisions provide the shareholders that have been accrued but not issued as of March 31, 2016.  Therefore the percentages would be increased by approximately 5% total if such dilution shares were issued.
(2)	The shares described above have been adjusted to reflect the impact of the 500-1 reverse stock split effective on February 14, 2012.

		2019				2018
Audit Fees		$	-			$	-
Audit and Related Fees			-				-
Tax Fees			-				-
All Other Fees			-				-
Total		$	-			$	-

	Sector 10, Inc
Date: June 13, 2019	By	/s/ Pericles DeAvila
		Pericles DeAvila, Principal Executive Officer
Date: June 13, 2019	By	/s/ Laurence A. Madison
		Laurence A. Madison
		Chief Financial Officer